Unlike the official CFLP, the Markit/HSBC PMI indicated that manufacturing grew in February after adjusting for seasonal factors, including the recent Lunar New Year holidays. The reading for February was revised upward from the flash estimate of 50.1 to 50.7 for the final. This was up from January's reading of 49.7.
Both output and total new orders expanded at faster rates. However, latest data indicated that external demand was relatively weak, with new export business declining for the first time in 10 months. Meanwhile, average input costs declined sharply over the month, as companies continued to benefit from lower costs for oil and oil-related products, which contributed to a solid fall in prices charged.
The renewed improvement in overall operating conditions was supported by a stronger expansion of output in February. Though modest overall, it was the quickest increase in production since last August. According to panelists, greater client demand led firms to raise output over the month, as highlighted by a stronger expansion of total new orders. Data suggested that firmer domestic demand had helped to boost new business, as new export work declined moderately for the first time since April 2014.
Chinese manufacturing employment declined again in February. That said, the rate of job shedding eased to a fractional pace that was the slowest in the current 16-month sequence. Meanwhile, increased new orders contributed to a greater amount of unfinished business in February, with the rate of expansion quickening slightly since the start of the year.
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.
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.
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