China March official Manufacturing PMI 50.5 (expected of 50.5) | Forexlive

Solid results these. Not spectacular, but for diffusion indexes these are good results. More on this below

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Earlier:

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A diffusion index is a statistical measure used to summarise the direction of change in a particular economic indicator, typically based on survey data. It’s most commonly used in business and economic surveys, such as PMIs, to show whether activity is generally expanding, contracting, or staying the same.

How does it work?

• Respondents (like purchasing managers) are usually asked whether key business indicators (e.g. new orders, output, employment) have increased, decreased, or stayed the same compared to the previous month.

Each response is assigned a value:

• Above 50 = Expansion
• Exactly 50 = No change
• Below 50 = Contraction

So, for example:

A PMI of 50.5 means a majority of businesses reported growth compared to the previous month.

• A PMI of 49.6 means a majority reported a decline.

The reason diffusion index results (like PMIs) are often viewed positively—even if they don’t rise much—is because of how the index works and what it signals about the direction of economic activity rather than its speed or magnitude.

Here’s why:

Even a small increase above 50 indicates ongoing expansion. For example:

If a PMI rises from 50.4 to 50.5, it’s not a big jump—but it still means more businesses are reporting improvement than deterioration.

• The higher the number, the broader the expansion—but as long as it stays above 50, growth is continuing.

A diffusion index doesn’t need to surge to be encouraging. A steady, slightly rising index suggests:

• Resilience in economic activity,

• Confidence among businesses,

• And that contraction risks are low, which is especially important in uncertain or volatile environments.

Diffusion indexes are all about momentum—the general trend in business conditions. Even modest gains reflect:

• Cumulative improvement in areas like new orders or employment,
• And broad-based participation in recovery or growth, which can be more sustainable than sharp spikes.

If the index is rising, even slowly, it shows that more firms are reporting better conditions than worse. That’s a clear contrast to a reading below 50, where the majority see deterioration.

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In summary:

• A small rise in a diffusion index may not be flashy, but it’s still positive because it means things are getting better, not worse—and in economics, direction and momentum often matter more than size in the short term.