Source China Federation of Logistics and Purchasing (CFLP)
The index calculation is based on the survey of about 700 purchasing managers who evaluate the level of business dealing environment including employment, new orders, supply and stock.
The level exceeding 50 points indicates the manufacturing industry increase, while the level below 50 indicates reduction.
It's a leading indicator of economic health - businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy.
Effect of market
Considering the significance of China’s economy to the global economy, the index has a strong influence on the markets including exchange market.
The index growth is associated with the investor’s propensity to risk, thus provoking safe haven status currencies sales (Dollar, Yen, Swiss franc) and increasing the demand for high-yielding currencies.
Since China is the Australia’s major trade partner, the index growth provides strong support primarily to the Australian Dollar.