China has published its October business activity indices, and all three fell below 50. The data came out on October 31, at around 09:46 Moscow time. The composite indicator dropped from 50.7 to 49.3.
What PMI is. It is a business activity index. It is calculated from surveys of purchasing managers: orders, output, employment, prices. The 50 mark is the dividing line: above 50, business is generally growing; below 50, it is contracting.
Why this matters to a trader. China is the world's largest consumer of industrial raw materials. Weak Chinese statistics move copper, oil and the currencies of commodity economies.
What numbers came out?
The October figures look like this:
- Composite PMI: 49.3 versus 50.7 a month earlier
- Manufacturing PMI: 49.7 versus 50.7
- Services PMI: 49.7 versus 50.2
Industry fell the most - a full point over the month.
Why is this more important than an ordinary downturn?
The key is not the drop below 50 itself, but the breadth. All three segments fell below the threshold at once.
- September. The economy was still being pulled along by services and industry, both above the threshold.
- October. The support disappeared, and both sectors moved into contraction territory.
- Effect on the composite index. The fall in the manufacturing PMI dragged the composite indicator down more than each component individually.
What does this mean for a trader?
China is a key trading partner for Australia and commodity economies.
The main point: Chinese business activity data are traditionally in focus for traders of copper, oil, the Australian dollar, the yuan and Hong Kong indices.
It is convenient to keep the release dates of Chinese statistics in the economic calendar.
What happens next?
The market is watching Beijing. The main question is whether it will respond with stimulus.
- A renewed slowdown after a weak September strengthens talk of support for the economy.
- No official decisions have yet been announced following this data.
If you trade commodities and indices, it is worth choosing a challenge for your market in advance.
Did you watch the Asian session this morning?
Chinese data come out in the morning hours Moscow time. The European session is still asleep, but movement in commodities and currencies is already underway. Not everyone is willing to trade this window, and not only because of the seven-in-the-morning wake-up. In some prop programs, the Asian session is entirely outside permitted trading hours, and Chinese releases are treated as news events with a ban on entering near the release. It is worth checking this against your own schedule, not someone else's.