CN: CFLP Manufacturing PMI

January 31, 2017 07:00 CST

Actual Previous
CFLP Mfg PMI 51.3 51.4

China's CFLP Manufacturing PMI headline index fell to 51.3 in January from 51.4 in December. Despite this fall, the headline index has now been above 50.0, indicating stronger activity in the manufacturing sector, for six consecutive months.

The drop in the headline index reflected declines in two of the major the major components. The production index fell from 53.3 in December to 53.1 in January, while the new orders index fell from 53.2 to 52.8. The new export orders index, however, increased from 50.1 to 50.3, while the employment index rose from 48.9 to 49.2, indicating a slightly slower pace of job losses.

The Caixin Manufacturing PMI survey for January will be released later this week.

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.