China PMI Improves

China reported on Friday that factory activity was higher than expected in August, with the official manufacturing Purchasing Manager’s Index coming in at 51.3, CNBC reported. The Chinese manufacturing PMI had been forecast to fall to 51.0 in August from 51.2 in July, according to a poll of economists by Reuters. A reading above 50 indicates expansion, while a reading below that signals contraction. Despite the positive headline numbers, the breakdown of the data suggested that the situation was not as rosy, said Julian Evans-Pritchard, senior China economist at consultancy Capital Economics. That is as the slight improvement in the manufacturing PMI index was spurred by a pick-up in production. However, there was a rise in the inventories of finished goods, suggesting that demand was not keeping up with output, said Evans-Pritchard. New export orders were also weaker, he added. Nomura economists said in a note on Friday that the decline in new orders in August indicated a slowdown. China’s official services PMI for August rose to 54.2 for August against 54.0 in July, the national bureau of statistics reported.