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China's private sector expanded at the fastest pace in four months at the start of the third quarter driven by the upturn in manufacturing.

The Caixin composite output index rose to a four-month high of 51.9 in July from 51.1 in June, survey data from IHS Markit showed Thursday. A score above 50 indicates expansion in the sector.

"China's economic performance in July was stronger than expected, mainly due to sustained recovery in the manufacturing sector," Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, said.

"However, downward pressure on the economy likely remains as the index gauging companies' confidence towards the 12-month business outlook dropped in both the manufacturing and services industries."

Manufacturing output increased at the quickest pace in five months, while services activity expanded at the joint-weakest since May 2016. The services Purchasing Managers' Index fell to 51.5 in July from 51.6 in June.

New business grew at a weaker pace in services in July. On the other hand, new work placed at manufacturers advanced at a faster pace. Consequently, composite new business increased at the quickest pace in four months.

Employment trends continued to diverge across both monitored sectors in July. Services companies added to their payroll numbers for the eleventh month running, while manufacturing staffing levels continued to decline.

On the price front, survey showed that average input costs continued to increase across China's service sector in July, though the rate of inflation weakened since June. In contrast, the rate of cost inflation picked up to a solid pace across the manufacturing sector.

The survey signaled a further marginal increase in prices charged by Chinese services companies at the start of the third quarter. Manufacturing firms also raised their selling prices.

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