CN: CFLP Manufacturing PMI

Tue Feb 27 19:00:00 CST 2018

Consensus Actual Previous
CFLP Mfg PMI 51.1 50.3 51.3

China's CFLP Manufacturing PMI headline index fell from 51.3 in January to 50.3 in February, below the consensus forecast of 51.1. This is the third consecutive decline in the index. Some of this weakness, however, may reflect the impact of the timing of lunar new holidays, which fell in mid-February this year but late January last year.

The fall in the headline index reflects a sharp drop in the survey's production index from 53.5 in January to 50.7 in January. The survey's index of new orders also fell for a third consecutive month in February, while the new export orders index indicates these fell for a second consecutive month. Survey respondents also reported a faster pace of job shedding in February. Looking ahead, however, the survey's measure of business confidence advanced in February, perhaps supporting the case that some of the weakness in other indicators was driven by the timing of the lunar new year holidays.

Also released today, the CFLP Non-Manufacturing PMI headline index fell from 55.3 in January to 54.4 in February. The Caixin Manufacturing and Services PMI surveys for February will be released in coming 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.