Chinese production activity has grown in August at its slowest pace in an year, as the export orders shrink for the fifth consecutive month and employers cut workers. The grim results strengthened the stance that China’s economy will continue to cool in the coming months, while the US is increasing its tariffs on Chinese goods. This will likely lead to more spending and other measures to support growth from Beijing.

The Purchasing managers’ Index (PMI), prepared by Caixin/Markit, fell to 50.6 points in August from 50.8 points in the previous month, coinciding with economists’ forecasts.

Although the index remains above the 50 points for the 15th consecutive month, it is the weakest result since June 2017. Although production is slightly improving, the majority of other readings show declines.

The economy was already showing signs of tension before the trade war with the United States broke out. The regulators took strict measures to resolve financial risks and debt increased borrowing costs, as well as the complicated corporate borrowing. This, in turn, has led to a series of bankruptcies.

The news of weaker export orders, however, suggests that the deepening trade dispute is now exacerbating this tension, and the influence is beginning to be felt in factories in China.

The new export orders – an indicator of future activity – are shrinking, marking its longest series of declines since the first half of 2016. The sub-index reached 48.8 points in August against 48.4 points in July.

Friday’s official PMI survey also showed that export orders were down, although reading about activity was generally more positive.

Faced with rising costs and sluggish demand, the Chinese manufacturers have been cutting pay for nearly five consecutive years. However, job cuts in August have been the sharpest in an year.