CN: PMI Manufacturing Index

Thu Nov 30 19:45:00 CST 2017

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level 50.8 51.0

The Caixin Manufacturing PMI headline index for China fell to 50.8 in November from 51.0 in October. This index has now signalled expansion in the Chinese manufacturing sector for six consecutive months but also indicates that conditions are currently weak. Stricter environmental regulations appear to be one factor curbing activity in the sector.

Survey respondents reported output grew modestly in November but at a slightly faster pace than in October, while growth in new orders was reported to have moderated, with new export order also growing modestly. Reflecting these signs of current weakness in manufacturing conditions, the survey's measure of business confidence about the twelve-month outlook declined to match the lowest level level recorded since the series began in 2012. This was accompanied by a fall in the employment measure, indicating that jobs were shed in the sector at the fastest pace in three months.

Respondents reported slightly weaker but still relatively strong growth in input costs, mainly driven by higher global raw material prices. Selling prices, meanwhile, were reported to have been raised more aggressively in November.

The drop in the Caixin manufacturing survey's headline index contrasts with the official CFLP Manufacturing PMI - released earlier in the week - which showed a small increase in the headline index from 51.6 in October to 51.8 in November. The Caixin Services PMI for November is scheduled for release early next week.

The Caixin Manufacturing Purchasing Managers' Index (PMI) is based on monthly a questionnaire that surveys of over 500 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.