China's factory activity accelerates in August as demand picks up

China's manufacturing sector grew at a faster clip in August, according to a private-sector survey released on Tuesday. The Purchasing Managers' Index (PMI) compiled by S&P Global climbed to 51.5 from 50.9 in July, comfortably above the 50-point threshold that separates expansion from contraction and ahead of analyst expectations of 51.

Output expanded at the quickest pace in three months, supported by firmer demand and capacity additions. New orders rose at a faster rate, helped by the sharpest increase in new export business in six months. Employment levels held steady after two consecutive months of gains, while backlogs of work accumulated at the fastest pace since March as demand outstripped capacity.

Finished goods inventories grew at the sharpest rate since September 2025, and firms stepped up purchasing activity after trimming it in July. Input cost inflation ticked up slightly, though S&P Global described cost pressures as relatively modest. Manufacturers cut output prices for the first time this year, citing intense competition and promotional discounting.

The data comes amid a broader slowdown in the world's second-largest economy. GDP growth eased to 4.3% in the second quarter, the weakest in over three years and below forecasts, after expanding 5.0% in the first quarter. Soft domestic demand and external uncertainties, including trade tensions and geopolitical risks, continue to weigh on the recovery.

Looking ahead, factories remained optimistic about production over the next 12 months, but overall confidence slipped to its softest level since January, the survey showed.