In contrast to the official CFLP manufacturing PMI, the Caixin final PMI reading was 47.2, slightly higher than the flash 47.0. This reading signaled the quickest deterioration in operating conditions faced by Chinese manufacturers since March 2009. Total new work fell at the quickest rate in over three years, partly driven by a steeper fall in new export business. As a result, companies cut output at the sharpest rate in six-and-a-half years, while staff numbers fell at the quickest pace since the start of 2009. Reduced production schedules also prompted firms to lower their purchasing activity again in September, while disappointing sales led to the strongest increase in stocks of finished goods for over three years. On the price front, both input costs and output charges fell at sharper rates.
A key factor weighing on the headline index was a sharper contraction of manufacturing output in September. According to panelists, worsening business conditions and subdued client demand had led firms to cut their production schedules. Weaker customer demand was highlighted by a further fall in total new orders placed at Chinese goods producers in September. Furthermore, the rate of reduction was the steepest seen for just over three years. Data suggested that the faster decline in total new business partly stemmed from a sharper fall in new export work. The latest survey showed new orders from abroad declined at the quickest rate since March 2009.
Reflective of lower workloads, manufacturing companies cut their staff numbers again in September. Moreover, the latest reduction in employment was the fastest seen in 80 months. Meanwhile, reduced production capacity led to an increased amount of unfinished work, though the pace of backlog accumulation was only slight. Input buying fell for the third month in a row in September, amid reports of lower production schedules and fewer new orders. As a result, stocks of inputs declined again in September at a modest pace.
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.
CME Group is the world's leading and most diverse derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.