The flash index is published on a monthly basis ahead of final PMI data, making it the earliest available indicator of manufacturing conditions in China.
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The private Caixin/Markit manufacturing purchasing managers’ index (PMI) dropped to 47.1 from 47.8 in July.
Gross domestic product dipped to 7% in the second quarter, and economists expect the figure to trend lower over the next few years.
A reading above 50 indicates expansion, while a reading below that represents contraction.
Dr He Fan, chief economist at Caixin Insight Group, tried to put a positive light on the release saying that even though the PMI fell further from July’s two-year low “the likelihood of a systemic risk remains under control and the structure of the economy is still improving”. “There is still pressure on the front of maintaining growth rates… the government needs to fine tune fiscal and monetary policies”. Still, U.S. home resales rose to a near 8-1/2-year high in July and factory activity in the mid-Atlantic region picked up this month, fresh signs of steady economic growth that likely keeps the Federal Reserve on track to raise interest rates this year.
The reading released on Friday suggests Beijing may need to do more to reach its goal for the year of about 7% economic growth over 2014.
Chinese stocks – which have been extremely volatile in recent months – extended falls after the figures came out, with the benchmark Shanghai Composite Index down 3.04 percent by the break.
Factory closures in Beijing and surrounding areas to ensure blue skies above the notoriously polluted city for a huge military parade next month commemorating victory over Japan in World War II were another factor, he said in a report.
However, the FTSEurofirst 300 was supported of its lows after data showed an unexpected acceleration in Euro zone business growth this month, while German manufacturers grew more strongly than expected.
New orders and new export orders continued to decline at a faster rate in August, and employment dropped at a faster pace than in July, said the survey.
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In August, the central bank stunned global markets by taking steps to devalue the country’s currency, the yuan, and allowing it more freedom to fluctuate in line with market developments.
