In August 2014, China’s manufacturing purchasing managers index (PMI) was 51.1 percent, 0.6 percentage points lower over last month, fell back after having increased for 5 consecutive months, but still was the second highest point since this year, indicating that China’s manufacturing sector continued to maintain growth generally.
In view of the sizes of enterprises, the PMI of large-sized enterprises was 51.9 percent, decreased 0.7 percentage points month-on-month, stayed above the threshold, and was the second highest point since this year, as well as the primary supporting strength of the continued growth of manufacturing sector; that of medium-sized enterprises was 49.9 percent, down by 0.2 percentage points month-on-month, and dropped below the threshold after staying above it for 4 consecutive months; that of small-sized enterprises was 49.1 percent, down by 1.0 percentage point month-on-month, and returned to the contraction range.
In August, among the sub-indices, 2 sub-indices increased, 10 decreased. Among the five sub-indices composing PMI, the production index and new orders index were above the threshold.
Production index was 53.2 percent, decreased 1.0 percentage point month-on-month, while 0.2 percentage points higher than the average this year, and continued to stay above the threshold.
New orders index was 52.5 percent, decreased 1.1 percentage points month-on-month, still 0.7 percentage points higher than the average this year, and stayed above the threshold. New export orders index was 50.0 percent, stayed at the threshold.
Employed person index was 48.2 percent, slightly decreased 0.1 percentage point month-on-month, still below threshold.
Main raw materials inventory index was 48.6 percent, decreased 0.4 percentage points over last month, and was below the threshold.
Supplier delivery time index was 50.0 percent, a decrease of 0.2 percentage points over last month, and stayed at the threshold.
Purchase quantity index was 51.9 percent, 1.1 percentage points lower than that in last month, and continued to stay above the threshold.
Main raw material purchase price index was 49.3 percent, a decrease of 1.2 percentage points month-on-month, and dropped below the threshold.
Import index was 48.5 percent, went down by 0.8 percentage points month-on-month, and had stayed below the threshold since December 2013.
Finished goods inventory index was 48.1 percent, increased 0.5 percentage points over last month, and has risen below the threshold for 3 consecutive months.
Open orders index was 45.9 percent, a decrease of 0.5 percentage points over last month, and continued to stay above the threshold.
Production and business activities expectation index was 57.9 percent, increased 2.6 percentage points month-on-month, and had picked up for 2 consecutive months.
1. Explanatory Notes
Purchasing Managers Index (PMI) is an index summarized and compiled through the results of the monthly survey of enterprises purchasing managers. It covers every links of the enterprises, including purchasing, production, logistics, and so on. It is one of the leading indices which was commonly adopted by international society to monitor the macroeconomic trends, and played an important role in forecasting and monitoring. The threshold of PMI is usually using 50 percent as the cut-off point for economic performance. If PMI above 50 percent, it reflects the manufacturing economy is expanding; if less than 50 percent, it reflects the manufacturing economy is in recession.
The survey involves 31 divisions of manufacturing sector in the “Industrial Classification for National Economic Activities” (GB/T4754-2011). The survey sample was expanded from 820 to 3000 since January 2013.
3. Survey Methods
PPS (Probability Proportional to Size) sampling method was adopted in manufacturing purchasing managers’ survey. Using the divisions of the manufacturing sector as the selecting strata, the sample size of each division is proportional to its proportion of the value-added of the division to the total value-added of the manufacturing sector. Within the stratum, the samples are selected according to the probabilities proportional to their principal business revenues of the enterprises.
The survey was organized and conducted by staff members of survey offices, monthly through Online Reporting System of NBS by sending survey questionnaires to the purchasing managers of the selected enterprises.
4. Calculation Methods
The questionnaire of manufacturing purchasing managers survey covers 12 questions related to production, new orders, export orders, existing orders, finished goods inventory, purchase, import, purchase prices, raw materials, inventory, employees, suppliers, delivery time, production and business activities expectation and etc.. Diffusion index was calculated for each question, i.e. percentage of positive answers in number of enterprises plus half of the percentage in the same answers.
PMI is a composite index, which was calculated according to five diffusion indices (group indices) and their weights. 5 group indices and their weights are determined in accordance with their leading impact on the economy. Specifically, new orders index weighted 30 percent; production index weighted 25 percent; employees index weighted 20 percent; supplier delivery time index weighted 15 percent; raw materials inventory index weighted 10 percent. Of which, the supplier delivery time index is a converse index, and contrary calculation is needed when combines it into PMI.
5. Seasonal adjustment
The purchasing managers’ survey is a monthly survey, the data of the survey fluctuates very much for the influences of seasonal factors. The released PMI composite index and sub-indices are seasonally adjusted data.