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According to PMI survey results, employment index and new orders index or production index sometimes differ in the direction of change, how should it be interpreted?

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In general, companies commence production upon receiving orders and then input manpower and raw materials into production (i.e. hiring laborers and ordering from upstream suppliers), and finally lead to sales or inventories. Thus, new orders are said to be the most leading among the indicators that make up the PMI or NMI, while employment index is more lagging by nature.

According to past experience of PMI index surveys, employment index is indeed more lagging by nature, and the fluctuation amplitude of this index is smaller. On the other hand, new orders are more leading and have bigger amplitudes of fluctuation. Hence, it is quite common for the indicators to fluctuate in different directions in a single month.

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