China's manufacturing sector continued to expand in June as production growth accelerated the most in two years underpinned by rising new orders, survey data from S&P Global showed on Monday.

The Caixin manufacturing Purchasing Managers' Index rose to 51.8 in June from 51.7 in the previous month. A score above 50.0 indicates expansion.

This was the eighth consecutive monthly improvement and also marked the fastest since May 2021.

However, the official survey showed that China's manufacturing sector contracted for the second straight time in June. The factory PMI held steady at 49.5.

Manufacturing output grew at the fastest rate in two years, S&P Global said. Firms in the consumer segment again registered sharp output expansion in June. New product launches and market development efforts helped to lift new work inflows. Export orders also continued to increase in June.

The increase in new work intakes led to a fourth consecutive month of backlog accumulation. Employment in the manufacturing sector was close to stabilization in June.

Manufacturers raised purchasing levels at one of the highest rates in more than three years in order to meet the rise in production. Stocks of finished goods increased slightly.

Suppliers' delivery times lengthened for the first time since February. Shortages of input materials and delivery constraints were cited as reasons for the delays.

Input costs increased at the fastest pace in two years in June. This has spurred firms to lift selling prices for the first time in six months. Average selling prices increased at the fastest pace in eight months.

Sentiment among manufacturers also remained positive midway into 2024. Confidence weakened to the lowest in over four-and-a-half years, dampened by concerns over rising competition and uncertain market conditions.

"Recent macroeconomic data show that the economy continues to recover, with stable production, demand, employment and prices, as well as strong exports," Caixin Insight Group senior economist Wang Zhe said.

The economist noted that the improvement in the manufacturing sector, insufficient market confidence and effective demand remain key challenges.

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