China factory growth accelerates, service industries slip

By KELVIN CHAN Markets Associated Press

Chinese manufacturing activity picked up pace in August, according to an official survey indicating a crucial component of the world's second-biggest economy is holding firm.

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The data released Thursday showed the monthly factory purchasing managers' index rose to 51.7 from 51.4 in July.

The index is based on a 100-point scale on which numbers above 50 indicate expansion.

It's the 13th straight month the PMI has posted an expansion, according to the data compiled by the Federation of Logistics & Purchasing released through China's official statistics website.

Output rose and overall new orders expanded but export orders grew at a slower pace, according to the survey's sub-indexes, indicating that domestic demand was strengthening at the expense of global demand.

A separate index measuring non-manufacturing activity fell for a second month, slipping to 53.4 from 54.5 previously, reflecting slowing momentum in China's services sector.

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Economists will also look for the release Friday of the private Caixin/Markit manufacturing PMI to get a more comprehensive picture of the economy. The federation's survey is focused more on large, state-owned companies while the Caixin index is weighted more to smaller, private enterprises, and the two don't always move in the same direction.

The latest numbers follow trade data released earlier in August showing that growth in both exports and imports slowed from July, in a discouraging sign for demand.

Forecasters expect China's economic growth to slower this year as bank lending controls aimed at slowing rising debt levels start to take hold.