CN: PMI Manufacturing Index

Mon Jan 01 19:45:00 CST 2018

Actual Previous
level 51.5 50.8

The Caixin Manufacturing PMI headline index for China advanced to 51.5 in December, up from 50.8 in November. This index is now at its highest level since August and has signalled modest but consistent expansion in the Chinese manufacturing sector for seven consecutive months.

Survey respondents reported output grew at its fastest pace in three months in December, with growth in orders and new orders also reported to have strengthened. The survey's employment measure continues to indicate payrolls are being cut in the sector but at the slowest pace since early in 2017. Respondents also reported some improvement in confidence about the 12-month outlook, though this measure remains close to the joint record low recorded in November.

Respondents reported another month of strong growth in input costs in December, mainly driven by higher prices for raw materials, though the pace slowed relative to that seen in each of the three previous months. Selling prices were also reported to have risen at a slightly weaker but still solid pace in December

The increase in the Caixin manufacturing survey's headline index contrasts with the official CFLP Manufacturing PMI - released over the weekend - which showed a small drop in the headline index from 51.8 in November to 51.6 in December. These two surveys also diverged in November. The Caixin Services PMI for December is scheduled for release later in the 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.