(Bloomberg) -- A private survey of China’s manufacturing activity unexpectedly expanded in August, adding to encouraging signs that the slump in factories may be near an end.  

The Caixin manufacturing purchasing managers index rose to 51 last month, the highest reading since February, and well above economists’ estimates. The index was above the 50 mark that points to an expansion in factory activity after a contraction in July.

The data adds to tentative evidence that targeted policies to help the economy were having some effect, and came on the back of Beijing’s concerted steps on Thursday to bolster the property market.

The official manufacturing PMI released on Thursday showed the contraction in activity easing in August as new orders and production improved. The Caixin survey covers mainly smaller and export-oriented businesses in China compared with the official PMI.

While the PMI figures suggest August activity data may be an improvement from July’s slump, there’s still need for caution, said Michelle Lam, Greater China economist at Societe Generale.

It remains uncertain “if the improvement is sustainable, given that policymakers haven been offering only piecemeal measures and confidence remains weak,” she said. “The latest property easing measures do offer more hope for a stabilization in the property sector.”

China’s benchmark CSI 300 Index extended gains after the Caixin PMI data to rise as high as 1.2%. The market was also boosted by the latest property market measures.

Chinese manufacturers reported subdued demand for exports, while domestic orders picked up, according to the Caixin survey. That’s in line with evidence elsewhere showing production of some commodities, like steel and iron ore, has remained solid, largely due to state investment in infrastructure, like railways.   

Firms recorded fresh increases in both output and total new work, with domestic orders being the main driver, Caixin and S&P Global said in a statement. 

The improvement in demand encouraged manufacturers to expand their purchasing activity and staffing levels, with the rate of job creation growing at the fastest pace since March 2010, according to the statement.

What Bloomberg Economics Says...

The Caixin climbed more than the official gauge, but a smaller sample size often makes its results volatile. This means the Caixin’s big jump likely overstates the speed of the economy’s turnaround, although the direction is probably right.

— Chang Shu and Eric Zhu, economists

Read the full report here.

An easing in China’s factory slump would benefit the rest of Asia as well. PMIs for some of the region’s major export powerhouses like Taiwan and South Korea showed further contractions in August, according to data released on Friday. Most of Asia’s economies count China as their biggest trade partner.  

The Chinese government has been ramping up policy support for the economy as data showed the economy weakening since the second quarter. Economists have cut their forecasts for annual growth closer to Beijing’s target of around 5%, which was deemed conservative when it was set in March.

Several support measures have been announced since late Thursday:

• The largest cities will be allowed to cut down payments on home purchases and lenders will lower rates on existing mortgages
• Personal income tax deductions were increased for child care, parental care and children’s education spending
• The central bank will trim the amount of foreign currency deposits banks are required to hold in reserve — a step that’s aimed at bolstering the yuan

Officials have also previously rolled out plans to increase consumer goods manufacturing and car sales to support factories.

--With assistance from Zhu Lin.

(Updates with additional details, economist comment)

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