CN: CFLP Manufacturing PMI

Mon Oct 31 20:00:00 CDT 2016

Consensus Actual Previous
CFLP Mfg PMI 50.3 51.2 50.4

The CFLP Manufacturing PMI headline index rose from 50.4 in September to 51.2 in October, well above the consensus forecast of 50.3. This is the highest level for the index since mid-2014 and represents a solid recovery from the recent low of 49.0 recorded in February this year. The headline index has now been clear above 50.0, indicating stronger activity in the manufacturing sector, for three consecutive months. This follows several months where the index had been below or just above the 50.0 level.

This increase in the headline index reflected a strong increase in the production index, up from 52.8 in September to 53.3 in October. New orders also rose in October after a drop in September, even though the survey showed a fall in new export orders. The survey's employment index indicates that Chinese manufacturers continued to shed jobs in October, but at a slower pace than in previous months.

The increase in the headline index over the last few months is in line with the Caixin Manufacturing PMI survey, which also indicates that there has been some improvement in the Chinese manufacturing sector in the last few months.

The headline index of the CFLP Services PMI rose from 53.7 in September to 54.0 in October.

China Federation of Logistics and Purchasing (CFLP) Manufacturing Purchasing Managers Index (PMI) is the monthly survey of about 800 purchasing managers that is conducted jointly by CFLP and National Bureau of Statistics (NBS). The questions focus on 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.