China’s manufacturing continued to recover in August but at a slower pace than expected, according to the latest HSBC/Markit China manufacturing purchasing managers’ index (PMI) monitored by Kallanish The final August figure came in at 50.2, revised from a preliminary 50.3, with a figure over 50 indicating expansion.

China’s official manufacturing PMI was also down 0.6 points month-on-month to 51.1 in August.

“Although external demand showed improvement, domestic demand looked more subdued,” HSBC’s chief China economist Qu Hongbin explains.

“We think the economy still faces considerable downside risks to growth in the second half of the year, which warrant further policy easing to ensure a steady growth recovery,” he adds. Employment rates were falling at the fastest pace of the last three months and could be a driver for greater government support for the economy.

On a positive note for steelmakers, manufacturers increased their purchases of input materials, including steel products, for the fourth month in a row. The rate of increase however was slower than in previous months.

The price of manufacturers’ input materials also declined slightly.

Meanwhile, Japan’s manufacturing PMI, published by Markit and the Japan Materials Management Association reached a four month high of 52.2 in August, leading Markit to suggest the negative effects of a sales tax increase in April may be fading away.

Korea’s manufacturing sector posted the first increase in four months in August. The HSBC/Markit PMI came in at 50.3 as new orders returned to growth.

New export orders continued to decline on a fall in demand from Japan and China. Nevertheless, domestic demand should be supported by government stimulus and fiscal policy, HSBC says.