US: PMI Manufacturing Index

Fri May 01 08:45:00 CDT 2015

Consensus Consensus Range Actual Previous
Level 54.5 54.0 to 56.0 54.1 55.7

Markit's sample has been reporting some of the strongest activity of any manufacturing sample, making its otherwise respectable showing at 54.1 in April, down from 55.7 in March, yet another indication of weakness in the sector. Weakness, as in other samples, is centered in exports where orders, for the first time since November, are in outright contraction, the result of the strong dollar's depressing impact on foreign demand.

Production is the softest it's been all year, and that of course includes the winter months which, in most data, were hit hard by heavy weather. Deliveries continue to be delayed, the result not of strong demand but, interestingly, of continued issues tied to the long resolved port slowdown on the West Coast.

Price data, as they are in other reports, are very weak with inputs in contraction for a 4th month. The strong dollar may also be a factor here, pulling down the costs of imports.

Despite all the weakness, employment, as it has in other reports, continues to expand and at what this report describes a "robust" pace. But strength here will prove fleeting if orders don't pick up.

The economy is supposed to be getting a boost right now following the one-time troubles, as cited by Wednesday's FOMC statement, in the first quarter, but there's no evidence of it here. Watch for the ISM manufacturing report to be posted later this morning at 10:00 a.m. ET.

Market Consensus Before Announcement
The Markit PMI manufacturing flash index for April was not encouraging including a 54.2 reading 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 showed their first decline in this report since November 2014. New orders overall were growing at their softest rate since January. Production is also slowing, showing its softest growth rate since December.

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.