CN: CFLP Manufacturing PMI

Wed Dec 31 19:00:00 CST 2014

Consensus Actual Previous
CFLP Mfg PMI 50.1 50.1 50.3

China's manufacturing sector, especially those industries related to property market, is still struggling due to sluggish domestic demand. December CFLP edged down to a reading of 50.1, barely above the breakeven point between growth and contraction. In November, the index was at 50.3. Key components were weakened from November including production (52.2 down from 52.5), new orders (50.4 down from 50.9). Employment continued to decline, this time to 48.1 from 48.2. However, new export orders improved although they still indicated a contraction. The reading was 49.1, up from 48.4 in November. Business expectations contracted with a reading of 48.7 from 52.2.

A survey of about 800 purchasing managers about the health of the manufacturing sector. The numeric result is a diffusion index. A reading above 50 indicates that manufacturing is growing. A reading below 50 indicates contraction.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures. The CLFP manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices. The survey tends to have a greater impact when it is released prior to the HSBC/Markit manufacturing PMI because the two reports are correlated.