CN: PMI Manufacturing Index

Thu Mar 31 20:45:00 CDT 2016

Actual Previous
level 49.7 48.0

China's manufacturing sector slowed only very slightly in March, at a PMI of 49.7 for the best showing in 13 months and a sizable improvement from February's contractionary 48.0. New orders are back over breakeven 50 to indicate expansion as is production for the first time this year.

But the sample is not hiring with the rate of employment contraction easing only slightly from February's 7-year high. In another sign of defensiveness, manufacturers are keeping their inventories down. But prices are showing life, with both inputs and selling prices rising for the first time since July 2014 though only modestly. One negative is weakness in foreign demand as new export orders fell for a 4th month in a row.

There are negatives in the report and the composite remains below 50, but only barely, and the gain for new orders, which was domestically driven, is a positive for the outlook.

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.