CN: CFLP Manufacturing PMI

Mon Aug 31 20:00:00 CDT 2015

Consensus Actual Previous
CFLP Mfg PMI 49.8 49.7 50.0

China's manufacturing sector contracted slightly in August, underscoring the broader economic slowdown in the economy. The official CFLP manufacturing PMI was 49.7, exactly in line with expectations. It had been 50 the previous month - on the threshold that separates expansion from contraction. Readings have hovered around the breakeven point of 50 in 2015. The official PMI for the services sector was 53.4, down from a reading of 53.9 in July.

Only three of the sub-indexes gained on their respective July readings with the remainder weaker than in July. Production, new orders, new export orders, imports and employment were among the categories that recorded weaker readings in August.

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.