DE: PMI Manufacturing Index

Fri Jan 02 02:55:00 CST 2015

Consensus Actual Previous
Level 51.2 51.2 49.5

As indicated in the preliminary data, German manufacturing expanded at a modest rate at year-end. The final sector PMI for December stood at 51.2, unchanged from its flash estimate but 1.7 points above its final November outturn which constituted a 17-month low.

Production was up versus November but the rise was historically weak and intermediate manufacturers saw output only stagnate. New orders returned to positive growth after three months of contraction but their increase was only marginal and at least in part dependent upon stronger export demand. Still, backlogs rose as did employment and, indeed, the pace of job creation was the second strongest in almost three years.

Even so, inflation developments were again weak. Hence, input costs fell at their steepest rate in eight months and were reflected in a fresh decline in factory gate charges.

The move back above 50 in the headline PMI last month will come as something of a relief to policymakers but fourth quarter output growth was probably still quite sluggish and inflation pressures remain as muted as ever. There is nothing here to dent market speculation about further easing from the ECB this quarter.

Purchasing Managers' Manufacturing Index (PMIs) is based on monthly questionnaire surveys of selected companies which provide an advance indication of what is really happening in the private sector economy by tracking changes in variables such as output, new orders, stock levels, employment and prices across the manufacturing sectors.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM manufacturing index in the U.S. and the Markit PMIs elsewhere, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.

The Markit PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.