The February flash manufacturing PMI improved slightly to a reading of 50.1, up from 49.7 in January. Domestic demand firmed while new export orders contracted for the first time since April 2014. Both input and output prices remained in contraction. The data point to a marginal improvement in the Chinese manufacturing sector going into the Chinese New Year period in February. However, domestic economic activity is likely to remain sluggish and external demand continues to look uncertain.
Among the subindexes, output climbed to 50.8 from 50.3 the month before. New orders increased at a faster rate but new export orders decreased after increasing. Employment decreased at a faster rate while both input and output prices decreased at a slower rate. Socks of purchases, stocks of finished goods and quantity of purchases increased after decreasing in January.
The flash Purchasing Managers' Manufacturing Index (PMIs) is based on monthly questionnaire surveys of selected companies which provide an advance indication of what is really happening in the private sector economy by tracking changes in variables such as output, new orders, stock levels, employment and prices across the manufacturing sectors. The flash estimate is released about 10 days prior to the final PMI, which is posted usually on the first of the month.
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 Markit PMI 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 flash estimate gives investors an advanced look at what to expect on the first of the month.
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