HONG KONG (MarketWatch) -- The second of two manufacturing purchasing managers indexes covering China showed the strongest growth in a year Monday, with the rise fueled by demand within the country rather than through exports.

CLSA Asia Pacific Markets said its China manufacturing PMI remained in expansionary territory for the fourth consecutive month in July, rising to 52.8, up from 51.8 in June.

The expansion was the fastest since May 2008, prompting manufacturing companies to recruit additional workers for the second straight month, CLSA said.

"Manufacturing activity continues to accelerate and importantly, orders growth is being driven by the internal economy," said CLSA's head of economic research Eric Fishwick.

Fishwick said export demand was "lackluster," reflected in part by a weak pricing environment for exported goods.

The PMI showed companies lifted prices in July for the first time in almost a year. It also found manufacturers recorded rises in input-price inflation for the first time since September.

The CLSA data came just days after the China Federation of Logistics and Purchasing released its own PMI, showing a slight rise of 0.1 point in July to 53.3.

The CFLP version, however, showed a more sizeable growth in export-driven demand, with new export orders up 0.7% to 52.1 points. See full story on CFLP's China PMI for July.

High points

Standard Chartered said the data added to evidence that companies had finished drawing down inventories and were now submitting new orders for finished goods.

"This is a bullish signal for activity over the next few months," wrote Standard Chartered economists headed by Stephen Green in Shanghai in a note Monday, pointing to a 2.2% on-year fall in July inventories of finished goods.

However, Green also cautioned that the CFLP's PMI remained below the average of 54.5 seen through 2005 and 2007, which suggested growth in China's manufacturing sector would be relatively muted.

Merrill Lynch said in a note Monday the CFLP PMI provided additional evidence the economy is on the mend, even though the headline figure was below its analysts' forecast of 53.9.

"It supports our view that China's recovery is being solidified," Merrill economists headed by Ting Lu said.

Merrill said it expects China's economic growth will accelerate to 9.2% in third quarter, and 11.3% in the fourth.