Chinese manufacturers saw the quickest deterioration in operating conditions for over six years in August, to a reading of 47.3, up slightly from the earlier flash reading but down from July's 47.8. Total new orders and new export business declined at sharper rates than in July, and contributed to the most marked contraction of output since November 2011. Lower production requirements prompted companies to reduce their purchasing activity at the fastest rate since March 2009, while weaker client demand led to the first rise in stocks of finished goods in six months. Meanwhile, softer demand conditions contributed to marked falls in both input costs and output charges in August.
August data signaled a second successive monthly decline in total new work placed at Chinese goods producers, with the rate of contraction quickening to a 17-month record. New export business declined at the steepest rate in just over two years. Softer client demand led manufacturers to scale back their production again in August, with the latest reduction in output the quickest seen since November 2011.
Chinese manufacturing companies reduced their workforce numbers for the twenty-second month in a row in August. Furthermore, the rate of job shedding accelerated since July to a pace that was similar to June's 76-month record.
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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