(Yicai Global) Sept. 1 -- China's manufacturing activity declined further last month, contracting for the first time since May, according to the findings of a widely watched private survey, as Covid-19 outbreaks and an intense heatwave hampered production.

The Caixin purchasing managers' index came in at 49.5 in August, data released by financial media group Caixin showed today, missing the market consensus for 50.2 to fall below the 50 mark that divides contraction from expansion. The figure was 50.4 in July and 51.7 in June, the highest in a year.

The official manufacturing PMI released by China’s National Bureau of Statistics yesterday rose 0.4 point to 49.4.

“The economy is still slowly recovering from the widespread Covid-19 outbreak in the first half of the year,” said Wang Zhe, a senior economist at Caixin Think Tank. “Local flare-ups and the extreme heat wave disrupted the trend and created new downward pressures, posing a threat to the recovery.”

Manufacturing production expanded further in August, but demand contracted again. The production sub-index remained in positive territory for the third month in a row, the expansion has slowed as high temperatures led to power restrictions and production stoppages.

The sub-indexes for new orders and new exports snapped a two-month expansion, with both falling contracting, as demand weakened due to the heatwave, tight power supply, Covid-19 outbreaks, a worsening global economic environment, and other factors.

Against the backdrop of sluggish manufacturing demand, the jobs market has yet to improve significantly. The employment sub-index picked up, but remained below 50 as some employers shed jobs amid weak demand, with the most obvious contraction seen in investment categories.

“In the face of adverse factors such as recurring Covid-19 cases and natural disasters, there needs to be further subsidies and assistance for poor and low-income groups amid a sluggish job market and shrinking consumer demand,” Wang said.

The production and operation expectations index stayed below the long-term average in August. Some firms plan to raise output in light of the ongoing economic recovery after the epidemic, but uncertainty over Covid and concerns about the weakening global economic outlook have stymied any further pickup in business confidence.

Editor: Futura Costaglione