Manufacturing PMI rebounded, but overall activity across China’s three major sectors remained weak

Overview

The report interprets China’s official manufacturing and non-manufacturing PMI data for August 2026. Manufacturing improved month over month and exceeded forecasts, while non-manufacturing was broadly unchanged; Goldman Sachs’ overall assessment remains that activity in manufacturing, services, and construction was subdued.

Core views

The official manufacturing PMI rose from 49.2 in July to 49.8 in August, above Goldman Sachs’ forecast of 49.4 and the Bloomberg consensus of 49.5. The official non-manufacturing PMI remained at 49.0, above Goldman Sachs’ forecast of 48.8 but below the Bloomberg consensus of 49.4. Goldman Sachs’ Asia-MAP assigned this manufacturing PMI reading a score of +3 (3, +1): a growth relevance score of 3 out of 5 and a surprise relative to consensus of +1, on a scale ranging from -5 to +5. Despite the better-than-expected manufacturing data, the report’s overall conclusion remains that activity across all three major sectors was weak. The manufacturing improvement was mainly driven by demand and production components. The new orders index rose sharply from 48.5 to 50.6, the largest increase among the major components; the output index rose from 49.9 to 50.4. The employment index, however, fell from 49.0 to 48.7, indicating that the rebound in production and orders had not yet translated into stronger employment. The suppliers’ delivery times index rose from 49.5 to 50.1, which the National Bureau of Statistics interpreted as faster deliveries. At the industry level, the new orders and output indices for electrical machinery and equipment, as well as computers, communications, and other electronic equipment, were all above 53; manufacturing activity in chemical raw materials and chemical products, and ferrous metal smelting and rolling processing weakened. Foreign trade-related components also improved: the new export orders index rose from 49.6 to 50.1, while the imports index increased from 47.5 to 48.6. Meanwhile, inventories did not rise in tandem, with the raw materials inventory index edging down from 48.3 to 48.1 and the finished goods inventory index falling from 48.6 to 48.4. By enterprise size, the PMI for large enterprises rose from 49.5 to 50.6 and that for small enterprises increased from 47.4 to 47.9, while the PMI for medium-sized enterprises declined from 49.7 to 49.4, reflecting continued divergence among enterprises of different sizes. Price components rebounded notably. The manufacturing input price index rose from 53.2 in July to 56.6, while the output price index increased from 47.8 to 50.4; this marked a rebound after four consecutive months of declines in manufacturing price indicators. The National Bureau of Statistics attributed the price increases to recent rises in crude oil and nonferrous metal prices, with both the input and output price indices for nonferrous metal smelting and rolling processing rising above 60. However, the input price index remained significantly higher than the output price index, leading Goldman Sachs to believe that manufacturing profit margins remained under pressure. In non-manufacturing, the composite index remained at 49.0. The services PMI was unchanged at 49.3, but industry performance diverged: the PMIs for postal services; telecommunications, radio, television, and satellite transmission services; and internet, software, and information technology services were all above 55, while the PMIs for wholesale, retail, and capital market services were below 50. The construction PMI edged down from 47.0 to 46.9, remaining low relative to its historical average. The National Bureau of Statistics noted that adverse weather, including heavy rainfall and typhoons in some regions, slowed construction progress. Goldman Sachs believes the August rebound in manufacturing PMI partly reflected residual seasonality: over the past year, the first month of each quarter, including July, often recorded the quarter’s lowest reading. Therefore, a one-month rebound does not indicate that activity has strengthened broadly. Considering the persistent weakness in services and construction, declining manufacturing employment, and input costs significantly exceeding output prices, the report ultimately concludes that overall activity in manufacturing, services, and construction remained subdued in August.

Analysis framework

The report first compares the actual August PMI readings with July, internal forecasts, and Bloomberg consensus expectations, and uses Asia-MAP to summarize the data’s relevance to growth and its surprise relative to expectations. It then breaks down manufacturing components covering orders, output, employment, deliveries, foreign trade, inventories, enterprise size, and prices, before analyzing differences across services and construction industries. Finally, it assesses overall activity and profit margin pressure by considering the seasonal pattern of weaker readings in the first month of each quarter over the past year and the input-output price gap.

Methodology notes

• Event-driven strategies and behavioral financeExpectation gap/expectation management

  Asia-MAP growth relevance and data surprise scoring

  The report compares the actual manufacturing PMI with Goldman Sachs’ forecast and the Bloomberg consensus, and discloses a growth relevance score of 3 out of 5 and an expectations surprise score of +1 on a scale from -5 to +5, distinguishing the importance of the data itself from its deviation relative to market expectations.

• (Method outside the vocabulary)

  Breakdown of PMI components, industries, and enterprise sizes

  Rather than examining only the headline PMI, the report further compares changes in orders, output, employment, trade, inventories, prices, and different industries and enterprise sizes to assess whether the improvement was broad-based and understand its internal structure.

• (Method outside the vocabulary)

  Residual seasonality assessment

  Referring to the pattern over the past year in which the first month of each quarter typically recorded the quarter’s lowest PMI, the report believes that part of the August rebound in the manufacturing index may merely represent a recovery from July’s seasonal low.

Key data

• Official manufacturing PMI49.8August reading; 49.2 in July, versus Goldman Sachs’ forecast of 49.4 and the Bloomberg consensus of 49.5.
• Official non-manufacturing PMI49.0Unchanged from July in August; Goldman Sachs forecast 48.8 and the Bloomberg consensus was 49.4.
• Asia-MAP manufacturing PMI score+3 (3, +1)Growth relevance was 3/5, the surprise relative to consensus was +1, and the surprise score ranged from -5 to +5.
• Core manufacturing componentsNew orders 50.6; output 50.4; employment 48.7; suppliers’ delivery times 50.1The July readings were 48.5, 49.9, 49.0, and 49.5, respectively; an increase in the delivery times index indicates faster deliveries.
• Manufacturing foreign trade componentsNew export orders 50.1; imports 48.6The July readings were 49.6 and 47.5, respectively, with both improving.
• Manufacturing inventory componentsRaw materials inventory 48.1; finished goods inventory 48.4The July readings were 48.3 and 48.6, respectively, with both edging down.
• PMI by enterprise sizeLarge 50.6; medium-sized 49.4; small 47.9The July readings were 49.5, 49.7, and 47.4, respectively; large and small enterprises rebounded, while medium-sized enterprises declined.
• Manufacturing price componentsInput prices 56.6; output prices 50.4The July readings were 53.2 and 47.8, respectively; price indicators rebounded after four consecutive months of declines, but input prices remained significantly higher.
• Services PMI49.3Unchanged from July in August; postal services, telecommunications, and internet software industries were above 55, while wholesale, retail, and capital market services were below 50.
• Construction PMI46.9The July reading was 47.0; it remained low relative to the historical average, and adverse weather slowed construction progress.
• Components for key manufacturing industriesAbove 53The new orders and output indices for electrical machinery and equipment, as well as computers, communications, and other electronic equipment, were all above 53.
• Nonferrous metals industry price indicesBoth input and output price indices were above 60.0The National Bureau of Statistics noted that increases in crude oil and nonferrous metal prices drove manufacturing price components higher in August.

Impact & implications

The report believes that the rebound and better-than-expected performance of manufacturing PMI in August are insufficient to prove that economic activity has strengthened broadly, as part of the improvement may be seasonal, services and construction remain weak, and manufacturing employment is also declining. In addition, input prices are rising faster than output prices, implying that enterprises are still unable to fully pass on costs and profit margins remain under pressure.

Risks

• The manufacturing input price index was significantly higher than the output price index, and the report believes profit margins will remain under pressure.
• Heavy rainfall and typhoons in some regions have slowed construction progress, constituting a clear disruptive factor behind weaker construction activity.