CN: CFLP Manufacturing PMI

Tue Jun 30 20:00:00 CDT 2015

Consensus Actual Previous
CFLP Mfg PMI 50.4 50.2 50.2

China's factories held up in June after the country's official CFLP PMI index showed the manufacturing sector continued to expand for the fourth consecutive month. According to CFLP, the June manufacturing purchasing managers' index was 50.2, unchanged from May and slightly below expectations of 50.4. Any level above 50 reflects growth and the sector last contracted in February.

China's economy grew at a 7 percent year-on-year pace in the first quarter, the slowest rate of growth in six years. Chinese policymakers are now talking of the 'new normal' - a new period of slower growth - after the economy's dramatic expansion over the previous two decades.

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.