The Caixin China General Manufacturing PMI fell to 49.2 in August 2021 from 50.3 in July, missing market estimates of 50.2. This was the first contraction in factory activity since April 2020, dragged down by containment measures to curb rising cases of the Delta strain, supply bottlenecks, and high raw materials. Output shrank for the first time in 17 months; new orders dropped for the second month which was the steepest rate in 16 months, and exports sales contracted for the first time since February. Also, buying levels fell after rising in July. Meantime, employment was down fractionally after broadly unchanged a month earlier, with backlogs of work increasing at the fastest rate since May. Prices data showed input cost inflation picking up for the first time in three months, while factory gate prices rose only modestly, despite the rate of increase picking up. Lastly, sentiment remained strong, despite the degree of optimism unchanged from July's 15-month low.
The economy goes through four broad cycles: expansion, peak, contraction, and trough.
During the expansion and peak, there are many jobs, and most people are optimistic about how things are going.
During the contraction and trough phases, things get more challenging.
Eventually, the whole cycle then starts again.
Economic indicators tell us where in the cycle we are, in which direction we are moving, and when we may (or are) entering the next phase.
This is accomplished through three types of economic indicators: leading, lagging, and coincident.
Most analysts and traders don’t focus on the specific number from an economic indicator but instead look for trends in the data over several releases.