China factory activity contracts for second month

China's factory activity contracted in August for a second straight month, official data showed Monday, with the manufacturing purchasing managers' index at 49.8, below the 50 line separating expansion from contraction.

The National Bureau of Statistics reading improved from 49.2 in July and was above the 49.5 forecast in a Bloomberg survey of economists. The non-manufacturing PMI, covering areas including services and construction, was 49.0, unchanged from July and below Bloomberg's 49.4 forecast.

National Bureau of Statistics statistician Huo Lihui said production and market demand in manufacturing expanded, but said steel production and chemical materials had weak market activity. Huo also said wholesale, retail and capital market services were weak and below the critical point.

China's economy is facing trade frictions with Washington and a property-sector crisis that has weighed on consumers. Zhiwei Zhang of Pinpoint Asset Management said rising commodity prices may have helped some upstream manufacturers, but that the effect was driven by supply rather than demand.