Factory activity in China continues to shrink for the 15th month

Manufacturing activity in China contracted for the fifth month in a row in August, continuing pressure on officials to boost economic growth amid weak demand at home and abroad.

But on the bright side, new orders rebounded for the first time in five months and factory owners noted that producer prices were improving for the first time in seven months, but the large-scale service sector remained in a downward trend.

The National Bureau of Statistics reported that the official Purchasing Managers ‘ Index rose to 49.7 from 49.3 in July, remaining below the 50-point level separating growth from contraction. The reading was higher than the forecast of 49.4.

The PMI provides the first evidence of the performance of the world’s second largest economy in August.

China’s economy is in danger of failing to meet Beijing’s annual growth target of about five percent, as officials struggle to combat a faltering real estate sector, weak consumer spending and slowing credit growth, prompting major banks to cut their growth forecasts this year.

High interest rates and inflation in the United States, Europe and other major export markets continue to reduce demand for Chinese goods. The sub-index of new export orders contracted for the sixth month in a row.

The non-manufacturing PMI, which includes sub-indices of Service and construction sector activity, fell to 51.0 from 51.5 in July led by the continued decline in services activity, while the composite PMI, which includes manufacturing and non-manufacturing activity, rose to 51.3 from 51.1.