China Purchasing Managers’ Indices

The release

How it is measured.

Both ask purchasing managers whether orders, output, employment, delivery times and stocks rose or fell, and both read above 50 when more firms report an increase than a decrease. The official survey has the larger panel, weighted towards large and state-owned companies. The private survey has a smaller panel with more small, private and export-oriented firms. Each publishes a manufacturing index and a services or non-manufacturing index.

Why markets watch it.

China is the largest buyer of many raw materials and a principal market for its neighbours, so its surveys are read well beyond the yuan: for the Australian and New Zealand dollars, for metals and oil, and for exporters elsewhere in Asia and in Europe.

How it is commonly misread.

When the two disagree it is usually because they ask different firms, not because one of them is wrong. Readings for the first months of the year are distorted by the Lunar New Year holiday, whose date moves. And the private survey’s title follows its sponsor: it carried another bank’s name before Caixin’s, and the name has changed again since, so the same series appears in commentary under several names.

An explanation of why the release is followed, not a view on what any market will do when it is published. Educational information, not investment advice or a recommendation to trade.