CN: PMI Manufacturing Index

Wed Jan 31 19:45:00 CST 2018

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level 51.5 51.5

The Caixin Manufacturing PMI headline index for China was steady at 51.5 in January, unchanged from the level recorded in December. This index is at its highest level since August and has signalled modest but consistent expansion in the Chinese manufacturing sector for eight consecutive months.

Survey respondents reported output grew in January at the fastest pace since December 2016 but also reported some moderation in growth in both new orders and new export orders. The survey's employment measure also saw some improvement, indicating that payrolls were cut in the sector at the slowest pace since February 2015. Respondents reported stronger confidence about the 12-month outlook.

The survey indicates that price pressures eased in January. Input costs grew strongly but at their slowest pace in five months, while selling prices were reported to have risen at the slowest pace since June.

The level and stability in the Caixin manufacturing survey's headline index is broadly in line with the official CFLP Manufacturing PMI - released earlier in the week - which showed a small drop in the headline index from 51.6 in December to 51.3 in January. The Caixin Services PMI for January is scheduled for release learly 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.