Customers purchase vegetables at a supermarket on August 9, 2019 in Hangzhou, Zhejiang Province of China.

China's factory gate prices contracted for the second month in August and at a sharper rate, reinforcing the urgency for Beijing to step up stimulus as a deepening trade war with the United States heaps pressure on its manufacturing sector and the broader economy.

The producer price index (PPI), a key barometer of corporate profitability, dropped 0.8% from year earlier in August, National Bureau of Statistics (NBS) said.

It was the worst year-on-year contraction since August 2016, when it fell 0.8%.

Analysts polled by Reuters had expected factory gate inflation to have shrunk 0.9% year-on-year last month, following a 0.3% decline in July.

The consumer price index (CPI) rose 2.8% in August on-year, unchanged from July. That compared with a 2.6% increase predicted by analysts.