China launches composite purchasing managers’ index in bid to help economic forecasters
Gauge will bring presentation of economic data more in line with countries like the US and UK, statistics bureau says
China’s statistics agency on Wednesday launched a monthly composite purchasing managers’ index, which it said will give economists another tool with which to measure the world’s second-largest economy, although a local analyst questioned its value.
The new gauge, which is based on data from the existing manufacturing and non-manufacturing PMIs, will provide a broader measure of economic activity, the National Bureau of Statistics said in a statement.
It will also bring the presentation of China’s economic data more in line with other countries, including the United States and the United Kingdom, the agency said.
However, Julian Evans-Pritchard, a China analyst at consultancy Capital Economics, said the problem with the new measure was that it was based on the two existing gauges, neither of which was considered reliable.
His criticism was that even when there was an obvious weakening in a specific sector of the economy, the official PMIs were “too stable”.
“We don’t think the component PMIs, particularly the official [manufacturing] gauge, are a good guide,” he said. “That’s why I would be a bit sceptical about relying too much on the new composite index.”
Analysts use PMIs – which measure business activity in different industries by polling purchasing managers about their companies’ output, new orders, stock levels, employment and suppliers’ delivery times – to help forecast economic performance.
Readings above or below a 50 point baseline indicate whether an economy is expanding or contracting.
China’s first PMI was launched in 2005 by the semi-official Chinese Federation of Logistics and Purchasing. The statistics agency got involved seven years later and the joint data releases became a monthly occurrence.
Analysts noted at the time that soon after the NBS got involved the indicators appeared to become much less volatile, triggering speculation that the agency was ironing out fluctuations. The bureau responded by saying that the flatter readings were the result of it using larger sample sizes.
Alongside the official indicators, Markit Economics produces its own monthly PMIs for the manufacturing and non-manufacturing sectors, which since 2015 have been sponsored by Caixin Media.
These are published slightly later than the government figures and frequently paint a different picture of the economy. One of the reasons for the discrepancy is the difference in the polls’ samples and focus.
The official surveys question purchasing managers at 3,000 manufacturing and 4,000 non-manufacturing companies, with a heavy emphasis on the state sector.
In contrast, the Caixin-Markit gauges focus more on small- and medium-sized enterprises, tracking 500 manufacturers and 400 service firms.
The NBS said on Wednesday that the January composite PMI came in at 54.6, unchanged from the figures returned in trials conducted over the previous two months.
In comparison, the official manufacturing PMI for January fell to an eight-month low of 51.3, while the non-manufacturing gauge rose for a third month in a row to 55.3, it said.