China's factory activity in August expanded at the quickest pace in five months on the back of rising new orders, a private-sector survey showed on Monday.
The RatingDog China General Manufacturing PMI, compiled by S&P Global, rose to 50.5 in August from 49.5 in July, beating analysts' expectations of 49.7 in a Reuters poll. The 50-mark separates growth from contraction.
The result was better than that of an official survey released on Sunday that showed factory activity shrinking for the fifth straight month.
"Notably, the manufacturing sector is helping the recovery, but this rebound is patchy," said Yao Yu, founder of RatingDog.
"With weak domestic demand, potentially overstretched external orders, and slow profit recovery, the durability of the improvement depends on whether exports truly stabilise and whether domestic demand can pick up pace."
New export orders continued to contract in August, marking the fifth straight monthly decline, the RatingDog survey showed.
With Chinese exporters bracing for a peak in holiday shipments amid a trade truce with the United States, American shoppers looking for fake Christmas trees and holiday decor this year will have fewer choices and face higher prices as tariffs force retailers to scale back orders, Reuters reported.
However, overall new order growth accelerated to the quickest since March, leading to a renewed accumulation of backlogged work, according to the survey. The rate at which unfinished business increased was the quickest in six months.
Despite greater capacity pressures, manufacturers remained cautious when hiring, opting instead to shed staff for a fifth consecutive month.
To cope with rising costs, some producers raised their output charges while others were unable to pass on higher expenses to buyers due to intense competition, leaving average selling prices unchanged in August.
Supplier lead times lengthened for the sixth month in a row in August, as respondents cited shipping delays and logistics constraints.
Overall, factory bosses remained positive on the one-year outlook for output, with optimism at the highest since March amid hopes that economic conditions will improve and company expansion plans will help drive new sales.
Economists say economic fundamentals may worsen in the second half of the year, as U.S. tariffs and payback from frontloading shipments to get ahead of the duties, alongside the still stagnant property sector, weigh on growth momentum.
