US: PMI Manufacturing Index

Mon Mar 02 08:45:00 CST 2015

Consensus Consensus Range Actual Previous
Level 54.0 53.0 to 54.4 55.1 53.9

Factory growth picked up noticeably in the last two weeks of February based on Markit's index which rose to a final 55.1 from 54.3 at mid-month and 53.9 in final January. The 0.8 point gain from mid-month implies a roughly 56.0 level for the last two weeks of February.

Strength in Markit's sample group is centered in output and new orders, both of which are rising at 4-month highs. Shipping delays, typically indicative of tie-ups tied to strong demand, are also a positive factor for the index, but in this case the delays are tied to snags not related to demand, that is heavy weather on the East Coast and the West Coast port slowdown. The shipping snags made for a rise in backlogs and a rise in inventories of finished goods.

Other readings include no more than moderate strength in employment where growth is at a 7-month low. Price data show a second straight fall for inputs, due in part to reduced prices for steel as well as fuel, but also a rise in output prices to a 3-month high.

Factory indications have been mixed but growth trends are still soft on net, the result of weak foreign markets and strength in the dollar which further limits foreign demand. Coming up at 10:00 a.m. ET is the ISM's February report.

Market Consensus Before Announcement
The Markit PMI manufacturing flash index finished January at 53.9 versus 53.7 at mid-month. December's readings were the same: 53.9 for final December and 53.7 at mid-month. On the strong side were output volumes and employment, the latter is a special plus, while on the soft side was new business growth which is being held down by weakness in export orders. Here, the strong dollar and slowing foreign markets are a concern.

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.

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 in the U.S. and 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.

Markit originally began collecting monthly Purchasing Managers' Index (PMI) data in the U.S. in April 2004, initially from a panel of manufacturers in the U.S. electronics goods producing sector. In May 2007, Markit's U.S. PMI research was extended out to cover producers of metal goods. In October 2009, Markit's U.S. Manufacturing PMI survey panel was extended further to cover all areas of U.S. manufacturing activity. Back data for Markit's U.S. Manufacturing PMI between May 2007 and September 2009 are an aggregation of data collected from producers of electronic goods and metal goods producers, while data from October 2009 are based on data collected from a panel representing the entire U.S. manufacturing economy. Markit's total U.S. Manufacturing PMI survey panel comprises over 600 companies.