CN: CFLP Manufacturing PMI

December 31, 2016 07:00 CST

Consensus Actual Previous
CFLP Mfg PMI 51.5 51.4 51.7

China's CFLP manufacturing PMI headline index decreased from 51.7 in November, its highest level since mid-2014, to 51.4 in December, just below the consensus forecast for a small fall to 51.5. Despite this fall, the headline index has now been above 50.0, indicating stronger activity in the manufacturing sector, for five consecutive months.

The drop in the headline index reflected falls in the major components. The production index retreated from 53.9 in November to 53.3 in December, while the employment index indicated a slightly faster pace of job losses, falling from 49.2 to 48.9. The new export orders index also eased from 50.3 to 50.1 though the new orders index was steady at 53.2.

The CFLP non-manufacturing PMI survey, also released today, recorded a small fall in its headline index, down from 54.7 in November to 54.5 in December.

The Caixin PMI surveys for December will be released in the next few days.

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.