Manufacturing PMI

China Manufacturing Purchasing Managers Index (PMI) is an alternative indicator of China’s manufacturing PMI, which is calculated by state statistics bodies. The calculation is based on a monthly survey of purchasing managers from 3000 Chinese manufacturing companies.

The questionnaire includes 13 questions about the following business condition aspects in the past month: production volume, the number of new orders, the number of export orders, the number of unfilled orders, stocks of finished goods in warehouses, purchases, imports, prices paid, prices received, the number of employees, supplier deliveries, expectations for production and business activity for the next 6 months.

Respondents are polled to give a relative rather than a quantitative description of these indicators: whether each of them has improved, worsened or has not changed. Auxiliary diffuse indexes are compiled based on data received. Each of these indexes is calculated as percentage of positive answers plus half of neutral ones. A table of these indicators is provided in the detailed PMI report. However, manufacturing PMI calculation is not based on these 13 diffuse subindexes, but on five group indexes. Their weights are determined in accordance with the degree of their influence on economy:

• New orders: 30%;
• Production volum: 25%;
• Employment: 20%;
• Supplier deliveries: 15%;
• Stocks of raw materials: 10%.

PMI is one of the main indicators of the national economy state and particularly of the manufacturing sector. Purchasing managers are usually the first to notice changes in business conditions due to specifics of their work, therefore PMI can be considered a leading indicator of the country’s manufacturing sector.

Readings above 50 point to a general growth of manufacturing business activity, and readings below 50 indicate a decline. The growth of manufacturing PMI points to the development of Chinese manufacturing industry. This may affect yuan quotes positively.