Non-Manufacturing PMI

China Non-Manufacturing Purchasing Managers Index (PMI) is an alternative indicator of China’s service sector PMI, which is calculated by state statistics bodies. The calculation is based on a monthly survey of purchasing managers from 4000 Chinese service sector companies.

The questionnaire includes 10 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, 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. Non-Manufacturing PMI is compiled using these subindexes.

PMI is one of the key indicators of the national economy state and particularly of its service 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 service sector.

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