China's August RatingDog Manufacturing PMI rises to 51.5, hitting a two-month high; export new orders grow at the fastest pace in six months, factory gate prices decline for the first time this year

China's manufacturing sector saw further improvement in August, but divergent signals emerged on the price front.

On September 1, S&P Global and RatingDog jointly released the latest China Purchasing Managers' Index (PMI). The RatingDog China Manufacturing PMI recorded 51.5 in August, up 0.6 percentage points from July's 50.9, hitting a two-month high and remaining above the expansion threshold for the ninth consecutive month, marking the longest expansionary cycle in nearly five years. New orders increased for the 15th consecutive month, setting a new record for the longest period of continuous growth since 2018, while the growth rate of new export orders reached its fastest pace in six months.

Meanwhile, the price side showed noteworthy divergence: raw material costs accelerated slightly, but manufacturers cut factory gate prices for the first time in 2026, reflecting continued market competition pressures. Employment stabilized after two months of expansion, with significant divergence emerging among sub-industries.

RatingDog founder Yao Yu stated that the manufacturing sector continued to strengthen in August, with faster acceleration in demand, output, and exports: "The faster growth in new orders and robust expansion in exports are positive signals, while the first reduction in factory gate prices in 2026 shows that competitive pressures persist."

Surveyed companies remain optimistic about production prospects over the next 12 months, supported by factors such as rising market and customer demand, new product launches, business expansion plans, an improved macroeconomic environment, capacity expansion, and technological upgrades. However, overall confidence fell to its lowest level since January, indicating that optimism has moderated. Yao Yu added that the manufacturing PMI is expected to remain within expansion territory in the near term.

Demand and Output: Orders Expand Faster, Output Hits Three-Month High

In August, new orders for Chinese manufacturers grew for the 15th consecutive month, with the pace of growth picking up further from July and exceeding the long-term average. Companies attributed the increase in orders to improved market conditions, stronger customer demand, new customer acquisition, growth in exports, and business development efforts.

Export orders performed particularly well. Growth in new export business reached a six-month high, driven by strong growth in the consumer goods sector, providing important support for overall new order expansion.

Driven by a solid order pipeline, manufacturing output expanded for the ninth consecutive month in August, with the fastest pace since May. Backlogs of work also rose for the seventh consecutive month and at the fastest rate since March, indicating that current demand is outpacing production capacity.

Costs and Prices: Input Costs Edge Up, Factory Gate Prices Fall for the First Time This Year

The price front showed clear divergence in August. Input cost inflation accelerated for the first time since April, though the pace remained modest overall, primarily driven by rising prices of metals and oil, supplier pricing adjustments, market volatility, and stronger demand.

Despite rising cost pressures, manufacturers opted to lower factory gate prices—for the first time since 2026. Companies associated this move with intense market competition and promotional activities, and the extent of the reductions was generally modest.

The divergence between rising input prices and falling factory gate prices suggests that profit margins for some manufacturers are being squeezed. Yao Yu noted that this reflects "continued pressure under competitive market conditions."

Employment and Inventory: Staffing Remains Steady, Inventory Accumulation Continues

On the employment front, overall staffing was steady in August, after two months of consecutive growth. By industry, consumer goods manufacturers continued to expand their workforce, while intermediate and investment goods sectors saw layoffs, offsetting each other and resulting in a neutral overall employment index.

In terms of purchases and inventories, after a slight reduction in July, manufacturers resumed increasing their purchases in August at the fastest pace in nearly four months. Raw material inventories expanded for the ninth consecutive month, the longest accumulation streak since 2006–2007.

Finished goods inventories also grew at the fastest rate since September 2025. Supplier delivery times were largely unchanged from July, with overall supply chain operations remaining stable.