EMU: PMI Manufacturing Index

Wed Apr 01 03:00:00 CDT 2015

Consensus Actual Previous
Level 51.9 52.2 51.0

The final manufacturing PMI for March weighed in at 52.2, up 0.3 points versus its flash reading, 1.2 points above its final February print, and at a 10-month high.

The latest improvement was led by the fastest expansion of incoming new business since April 2014 and the strongest rise in employment in more than three-and-a-half years. Exports saw their largest gain since July 2014 with most countries benefitting from the weakness of the euro.

Input costs ended a 6-month run of declines by posting a modest advance, again in part reflecting the impact of the slide in the euro on import prices. Factory gate charges continued to drop but at their slowest rate in the current 7-month sequence of falls.

Germany (52.8), Italy (53.3) and Spain (54.3) all registered multi-month highs but while France also saw its PMI edge up, at 48.8 it remained stubbornly on the wrong side of the 50 growth threshold. Top of the PMI ladder was again Ireland (56.8) while Austria (47.7) occupied the bottom rung with a 4-month low.

Today's figures are consistent with only a modest rise in manufacturing activity in the first quarter. However, the more forward looking components of the survey bode well for the current period and the signs are that the recovery in the sector is gradually becoming more firmly entrenched. That said, the improvement has clearly been underpinned by the slide in the euro and policymakers will not want to see the unit's decline reversed any time soon.

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.