Manufacturing PMI

Over at a financial forum...

StJL - "Someone will have to explain to me again (Naybob) how China can have Manufacturing PMI below 50 for close to a year and still grow by 7%."

Thouest invoke me...  PMI = (P1*1) + (P2*0.50) + (P3*0)

P1 = Percentage number of answers that reported an improvement.
P2 = Percentage number of answers that reported no change.
P3 = Percentage number of answers that reported a deterioration.

There are 100 respondents, 50 say improvement, 50 say deterioration, the PMI is 50, no change.  PMI under 50 means the growth rate is ASSUMED to be in contraction, the further south of the median 50, the greater the level of contraction, under 42 is considered recessionary.  Flip that for expansion or above 50, above 58 your overheating.  Bare in mind, under 50 this does NOT mean negative, just that growth is PERCEIVED to be contracting.

  

Like any other econometric such as GDP, CPI, their inflation deflators, job situation, ad finitum... the PMI is wrought with potential fallacy, misuse and misinterpretation.  For the US methodology and calcs  see here.  For further elaboration on wholesale econometric falsity and China's house of cards see here and here and here.  Out.