EMU: PMI Manufacturing Index

Mon Feb 02 03:00:00 CST 2015

Consensus Actual Previous
Level 51.0 51.0 50.6

There were no revisions to the flash January PMI reading of 51.0 in the final report for the month. As such, the start of 2015 would appear to have seen a marginal pick up in business activity rates versus December (PMI 50.6) but the overall performance was still only sluggish.

That said, manufacturing production rose at its fastest pace in half a year, underpinned by moderate gains in both new orders and backlogs. Employment was up for a fifth successive month but, while the rate of jobs growth was in line with December's 8-month high, gains were still only mild. Tumbling oil prices were reflected in the steepest drop in input costs in some five and a half years and paved the way for a fifth successive decrease in factory gate prices which was also saw their sharpest fall in over one and a half years.

As indicated in the flash survey, the best performing country was Ireland (PMI 55.1) ahead of Spain (54.7) and the Netherlands (54.1). Germany (50.9) was disappointingly close to the 50 expansion threshold and both France (49.2) and Italy (49.9) were in negative growth territory.

The mixed results suggest little real change in the performance of the region's manufacturing sector at the start of the year. As such, they underline the need for the ECB's newly adopted QE programme but with official bond purchases not due to begin until March, the February PMI report may well paint a similarly sluggish picture.

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.