The world’s second largest economy and most dominant emerging market remains China and to get a window into the prospects for growth investors often look to PMI (purchasing managers’ index) data.

One influential reading is the Caixin/S&P Global China General Manufacturing PMI. Manufacturing accounts for a big chunk of Chinese GDP and PMI surveys are used globally as a leading indicator of economic health. Businesses have to react rapidly to changing market conditions and, given they control the purse strings, their purchasing managers hold what is likely to be the most up to date and relevant insight into the company’s view of the economy.

The Caixin/S&P index is compiled based on responses to questionnaires sent to a panel of around 650 private and state-owned manufacturers. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP.

Survey responses are collected in the second half of each month and indicate the direction of change compared to the previous month.

Any figure above 50 will imply growth whereas any number below this threshold indicates contraction. The index is a weighted average of five different underlying indices covering New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%).

This outlook is part of a series being sponsored by Templeton Emerging Markets Investment Trust. For more information on the trust, visit www.temit.co.uk

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