US: PMI Manufacturing Index Flash


Thu Apr 23 08:45:00 CDT 2015

Consensus Consensus Range Actual Previous
Level 56.0 55.5 to 56.4 54.2 55.3

Highlights
Early indications on this month's manufacturing activity are not encouraging including a 54.2 reading for the PMI flash where details are weak. And it's been weakness in export demand, the result of soft foreign economies and strength in the dollar, that has been hurting the sector. New export orders show their first decline in this report since November 2014. New orders overall are growing at their softest rate since January.

Production is also slowing, showing its softest growth rate since December. On the rise, however, is employment which continues to get a boost from confidence in the outlook. This confidence appears to be based on the assumption that first-quarter weakness was temporary and will not extend further into the year.

Other readings include slowing in supplier deliveries which, in this case, counter-intuitively raises the composite score. The positive effect is based on the methodological assumption that delays reflect strength in demand though in this case they reflect ongoing delays tied to the West Coast port slowdown that has since been resolved. Price pressures remain extremely soft with input costs contracting for a 4th month and prices for finished goods rising at the slowest rate in 11 months.

Last week's Empire State and Philly Fed reports were similarly soft, showing better readings at the headline level but weakness in orders tied to exports. The manufacturing sector is having a rough year so far and has not been contributing to the nation's economic growth.

Market Consensus Before Announcement
The Markit PMI manufacturing index (final) for March showed rising production and rising orders giving a lift to Markit's manufacturing PMI, to a 5-month high of 55.7 for final March vs 55.3 at mid-month and 55.1 in final February. The strength in production, underpinned by a rise in backlog orders, is giving a lift to employment. On the negative side were export orders underscoring the FOMC's concerns over weak foreign demand and the negative effects of the strong dollar. Inflation readings were very low, at a nearly 6-year low for inputs and a 10-month low for finished goods.

Definition
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. The flash index, usually released about a week before the final, gives a preliminary reading of conditions for the current month.

Description
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. The flash index, usually released about a week before the final, gives a preliminary reading of conditions for the current month.

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.