Explainer: China’s four PMIs, why they don’t always agree, and how to trade them
For AUD traders, the practical point is that China's PMI complex is really four data points a month, not one, and each carries a different weight.
Manufacturing surprises, especially from the NBS survey, tend to draw the sharpest and fastest reaction given their direct read on the heavy industry and construction linked demand that drives Australian commodity exports. Services and non-manufacturing prints are typically slower burners, but they matter for the domestic demand story, particularly the construction sub-index within the NBS Non-Manufacturing PMI, which speaks directly to Chinese property activity and its knock-on effect on steel and iron ore consumption.
The private Caixin or RatingDog services survey, being more consumption and small firm oriented, can sometimes tell traders more about the health of Chinese household spending than either official gauge. When manufacturing and services data from both survey providers move in the same direction, conviction in the AUD trade builds quickly; when they diverge, particularly between the factory and services sides, the market tends to look for confirmation elsewhere before committing.
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China publishes four PMIs a month across two providers and two sectors, and AUD traders who watch only the manufacturing headline are missing half the picture.
Summary:
- China's PMI complex has four regular components each month: the official NBS Manufacturing PMI, the NBS Non-Manufacturing PMI covering services and construction, the private Caixin/RatingDog Manufacturing PMI, and the private Caixin/RatingDog Services PMI.
- Both providers also publish composite output indices blending their manufacturing and services readings into a single gauge of overall economic activity.
- The NBS surveys draw on large panels weighted toward bigger, state owned and state linked enterprises, while the private surveys sample smaller panels skewed toward small and medium sized, often privately owned and export or consumer facing firms.
- All the indices share the same basic method, a diffusion index built from weighted sub-components, with 50 as the line between expansion and contraction, though the underlying questions and weightings differ slightly by sector and provider.
- The NBS Non-Manufacturing PMI's construction sub-index is a particularly direct read on Chinese property and infrastructure activity, which feeds through to demand for Australian iron ore, coal and other commodities.
- The private services survey tends to skew more toward consumer facing activity, so it can offer a different, sometimes earlier, signal on Chinese household demand than the state weighted NBS services gauge.
- This week's data illustrates the pattern: the NBS Manufacturing PMI for August rose to 49.8 from 49.2, while the NBS Non-Manufacturing PMI held at 49.0, and the private manufacturing survey is due today with a consensus for a further edge higher from July's 50.9.
China is unusual among major economies in publishing not one but two full sets of Purchasing Managers' Index surveys each month, one official and one private, and each of those covers both manufacturing and services. Understanding how the four resulting data points relate to each other, and to the composite indices built from them, helps explain why the Australian dollar sometimes reacts sharply to one release and barely moves on another.
The official side comes from China's National Bureau of Statistics, working with the China Federation of Logistics and Purchasing. It publishes a Manufacturing PMI and a separate Non-Manufacturing PMI, the latter covering both services and construction, with the two combined into a Composite PMI Output Index. The panels behind these surveys lean toward larger enterprises, including a significant share of state owned and state linked firms. That skew makes the NBS Non-Manufacturing PMI's construction sub-index especially informative, since it offers a fairly direct line of sight into Chinese property and infrastructure activity, a sector that has an outsized effect on demand for Australian iron ore, coal and other bulk commodities.
The private side, long published as the Caixin PMI and now branded RatingDog in partnership with S&P Global, mirrors that structure with a Manufacturing PMI, a Services PMI, and a blended composite. Its panels are smaller, generally around 500 firms, and weighted more heavily toward small and medium sized, privately owned businesses. On the manufacturing side that skew favours export oriented producers; on the services side it captures more consumer facing activity, from retail and logistics through to travel and technology related services. That makes the private services gauge a useful, sometimes earlier, cross-check on the state of Chinese household demand, an area the state weighted NBS panel is less well positioned to capture cleanly.
All four headline indices are built the same way, as diffusion indices (see below for more on what this is) assembled from weighted sub-components such as output, new orders, employment and prices, with a reading above 50 signalling expansion and below 50 signalling contraction. The shared method means the manufacturing pair, and the services pair, tend to move broadly together over time, since they are ultimately measuring the same economy. But divergences are common and often informative in their own right, for instance when infrastructure spending lifts state linked manufacturers faster than it reaches smaller private firms, or when export orders strengthen even as domestic consumption remains soft.
For traders using the Australian dollar as a liquid proxy for China exposure, all four data points carry information, but not equally. Manufacturing surprises, particularly from the NBS survey, tend to generate the fastest and sharpest reaction given how closely they track the commodity intensive, capital heavy side of the Chinese economy. Non-manufacturing and services releases are usually slower burners for AUD, but the construction detail within the NBS Non-Manufacturing PMI deserves particular attention given its bearing on the property sector, while a strong or weak private services print can shift the broader read on Chinese consumption trends. This week has offered a live illustration of the interplay: the NBS Manufacturing PMI improved to 49.8 in August from 49.2, even as the NBS Non-Manufacturing PMI held flat at 49.0, underlining that a pickup on the factory floor has not yet been matched by strength in services and construction. Today's private manufacturing survey, expected to edge further above July's 50.9, will add another piece to that picture, and traders would do well to weigh it, and its services counterpart when it is released, alongside the official data rather than in isolation.
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What is a diffusion index?
A diffusion index is a way of turning a survey of qualitative opinions, "did things get better, worse, or stay the same?", into a single number that can be tracked over time. PMIs are the best-known example, but the technique dates back much further, to the 1940s and 50s, when the concept was developed to summarise business cycle surveys where actual production or sales figures weren't yet available on a timely basis.
How it's built
Each month, purchasing managers are asked whether a given indicator, output, new orders, employment, and so on, has increased, decreased, or stayed the same compared with the prior month. The index is then calculated as:
Diffusion index = (% reporting an increase) + (0.5 × % reporting no change)
The "no change" respondents get half weight because they're neither adding to nor subtracting from the direction of travel, so they pull the index toward the neutral midpoint rather than counting as a full vote either way.
Why 50 is the line
If every single respondent reported an increase, the index would read 100. If everyone reported a decrease, it would read 0. If the results were evenly split between more, fewer and the same, or if literally nothing changed for anyone, the index sits at 50. That's why 50 is treated as the boundary between expansion and contraction, above it, more firms are seeing improvement than deterioration, below it, the reverse.
What it captures, and what it doesn't
The key thing to keep in mind is that a diffusion index measures the breadth of change, not the size of it. A PMI of 55 means more firms are seeing growth than not, but it says nothing about how much output has actually grown, a small increase reported by 60% of firms produces the same lift to the index as a large increase reported by 60% of firms. That's part of why PMIs are best read as sentiment and momentum indicators rather than as a proxy for GDP growth itself, and why they're valued for coming out early each month, well before harder production or trade data, even though they're a survey of opinion rather than a survey of actual output.
Why this matters for reading NBS versus Caixin/RatingDog
Since the composite PMIs are just weighted blends of several component diffusion indexes, output, new orders, employment, delivery times and inventories, a headline move can be driven by very different things underneath. Two PMIs can print the same headline number for entirely different reasons, one because more firms saw modestly stronger orders, another because fewer firms saw sharply weaker output. That's worth flagging in the sidebar, since it's exactly the kind of detail that explains why the sub-indices, not just the headline, are worth watching when NBS and Caixin/RatingDog readings diverge.
This article was written by Eamonn Sheridan at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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