China's PMI Was 51.0 Percent in June

Department of Service Statistics of NBS

China Federation of Logistics and Purchases (CFLP)

In June 2014, China's manufacturing purchasing managers index (PMI) was 51.0 percent, 0.2 percentage points higher over last month, and had increased for 4 consecutive months, indicating that China's manufacturing sector continued the good momentum of steady growth.

In view of the sizes of enterprises, the PMI of large-sized enterprises was 51.5 percent, increased 0.6 percentage points month-on-month, and continued to stay above the threshold; that of medium-sized enterprises was 51.1 percent, slightly down by 0.3 percentage points month-on-month, and had stayed above the threshold for 3 consecutive months; that of small-sized enterprises was 48.4 percent, down by 0.4 percentage points month-on-month, and continued to stay below the threshold.

In June, the five sub-indices composing PMI all picked up. Among the five sub-indices, the new orders index had the biggest rise, was the accelerator for PMI rising, and the production index was the highest, was the stabilizer for PMI smoothly running.

New orders index was 52.8 percent, increased 0.5 percentage points month-on-month, and was the peak since October 2013. New export orders index was 50.3 percent, went up by 1.0 percentage point month-on-month, and returned to stay above the threshold.

Production index was 53.0 percent, increased 0.2 percentage points month-on-month, rebounded for 2 consecutive months, indicating that manufacturing production continued to maintain steady growth trend, and the growth accelerated slightly.

Employed person index was 48.6 percent, increased 0.4 percentage points month-on-month, rose to a high point of this year, but still below threshold.

Main raw materials inventory index was 48.0 percent, kept at the same level over last month, and was below the threshold.

Supplier delivery time index was 50.5 percent, an increase of 0.2 percentage points over last month, and stayed above the threshold.

Import index was 49.2 percent, went up by 0.2 percentage points month-on-month, and stayed below the threshold.

Open orders index was 46.2 percent, an increase of 0.2 percentage points over last month, still below the threshold.

Finished goods inventory index was 47.3 percent, increased 0.2 percentage points over last month, and continued to stay below the threshold.

Purchase quantity index was 52.0 percent, 0.3 percentage points lower than that in last month, and had stayed above the threshold for 4 consecutive months.

Main raw material purchase price index was 50.1 percent, an increase of 0.1 percentage point month-on-month, and returned to stay above the threshold.

Production and business activities expectation index was 54.8 percent, dropped back 1.4 percentage points month-on-month, but this index had stayed above the threshold for 6 consecutive months, and was 0.7 percentage points higher over the same period last year.

Annotations:

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.

2.Statistical Coverage

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.