China’s PMI - which is worse?

China has two Purchasing Managers Indices, but it’s hard to see which one delivered a worse result today.

The Caixin PMI came in at 48.0, after hitting 48.4 last month. The Caixin index looks more at small to medium sized enterprises, and anything below 50 is a contraction in activity. the Caixin PMI has been below 50 for about 12 months, and although it staged a recovery of sorts last year, it continues to signal problems in manufacturing. And let’s face it, manufacturing has been one of the two main drivers of China’s economy for 15 years. the fact that this PMI is pointing south again is a worry.

It’s telling that the authorities ordered Caixin to stop punishing a Flash PMI. Reduce the amount of bad news?

The official National Bureau of Statistics PMI came in at 49 for February, above Caixin. But this was a bigger drop, as the NBS PMI was 49.8 in January. Considering that the NBS number has more input from China’s largest manufacturers. this is potentially more worrisome than the drop in the Caixin PMI. It’s now the 7th straight month of decline for the NBS PMI, and the figure has now reached the depths of the Global Economic Crisis.

To top the bad news off, China’s services PMI also slipped slightly, though it is still in positive territory.

PMI is an index based on what Purchasing Managers report, so it’s an indirect datapoint, but at a time when the world is looking for good news, today’s outcome is no help.