CN: CFLP Manufacturing PMI

Mon Nov 30 19:00:00 CST 2015

Consensus Actual Previous
CFLP Mfg PMI 49.8 49.6 49.8

The Chinese economy worsened in November, according to an official purchasing managers' index which showed the manufacturing sector continues to contract. The CFLP manufacturing PMI contracted for a fourth consecutive month in November. The PMI reading was 49.6, down from October's 49.8. Any score below 50 shows the sector contracted. It is the lowest reading since August. New orders slipped below the breakeven 50 level to 49.8 while new export orders slid to 46.4 from 47.4. Only production (51.9) and supplier delivery times (50.6) were above 50.

The highest reading for the manufacturing sector so far this year was 50.2 in May and June. In spring and early summer the sector looked like it was pulling away from a brief contractionary blip at the start of the year, but it has now been declining for four straight months.

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.