FR: PMI Manufacturing Index

Fri Jan 02 02:50:00 CST 2015

Consensus Actual Previous
Level 47.9 47.5 48.4

December's flash manufacturing PMI was revised down 0.4 points to 47.5 in the final data, nearly a full point short of its final November outturn. As a result the signs are that manufacturing activity contracted at its sharpest rate since August.

Output was down for a seventh consecutive month and more steeply than at any time since July. Falling production reflected further weakness in new orders which declined at much the same pace as in mid-quarter and included another marked deterioration in exports. Backlogs similarly extended their downward trend which now stands at some eight months. Meantime, employment was pared for a ninth successive straight month and job losses were the sharpest since August.

At the same time, the first fall in input costs in three months was accompanied by a tenth consecutive drop in factory gate prices albeit at a slightly reduced pace versus November.

French manufacturing apparently ended last year on a disappointingly weak note and if the PMI surveys are to be believed, probably subtracted from overall real GDP growth during the quarter. Accordingly, without a boost from services, total output runs the risk of falling below its third quarter level. In any event, the economy began the New Year on a much weaker than desired footing.

The Purchasing Managers' Manufacturing Index (PMI) 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.