China factory activity contracts for second straight month in August

China's manufacturing sector contracted for the second consecutive month in August, though the decline slowed, according to official data from the National Bureau of Statistics. The manufacturing purchasing managers' index (PMI) rose to 49.8 in August from 49.2 in July, exceeding analyst expectations of 49.5. New orders and export orders both indicated expansion, with the new orders index at 50.6 and export orders at 50.1.

Despite a minor dip in business expectations, the gauges remained firmly in expansionary territory, suggesting firms remain optimistic about future output, potentially bolstered by increased local government spending. The non-manufacturing PMI, however, remained unchanged at 49.0 in August, signaling a second straight month of contraction.

The broader composite PMI increased to 49.5 from 49.3. China's economy continues to face challenges, with industrial output, retail sales, and investment all slowing in July, impacted by weak domestic demand and an ongoing property downturn. While Beijing has introduced a 800 billion yuan financing tool for local projects, implementation is anticipated to be a lengthy process.