CN: PMI Manufacturing Index

Tue Mar 31 20:45:00 CDT 2015

Actual Previous
level 49.6 50.7

March final manufacturing PMI reading was 49.6, up from the flash reading of 49.2. However, this was down from 50.7 in February and signaled a renewed deterioration in the sector. After a marginal improvement in February, operating conditions deteriorated slightly in March. Total new orders declined for the first time since December, albeit marginally. This contributed to a slower expansion of output. Meanwhile, employment continued to decline in March, with the pace of job shedding picking up to the sharpest in seven months. On the costs front, deflationary pressures remained strong, with average input prices falling markedly, while prices charged by manufacturers declined for the eighth month running.

The drop in the headline index was partially driven by a fall in new business received by manufacturers during March. Though the rate of contraction was only slight, it was the first time that new orders had declined in three months. Anecdotal evidence suggested that subdued market conditions had dampened client demand both at home and abroad. Furthermore, new export work fell for the second month running, albeit at a fractional pace.

Manufacturing production increased for the third month running in March. However, the rate of expansion eased since February as a result of softer client demand. Staffing levels declined again in March, thereby extending the current trend to 17 months. Moreover, the rate of job shedding accelerated to the sharpest for seven months, with some companies linking lower workforce numbers to company downsizing policies. Reduced employment contributed to a further rise in backlogs of work in March, though the rate of accumulation was the slowest since last November.

Manufacturers continued to report a solid decline in input costs in March, despite the rate of reduction easing to the weakest for six months. Output charges also declined again in March, albeit at the slowest rate since last August.

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 purchasing managers' manufacturing indexes, 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.