German manufacturing expanded at a marginally quicker pace than previously signalled in April. The sector PMI printed a final 52.1, up 0.2 points versus its flash mark but still 0.7 points short of its final March level.
Compared with the end of the first quarter, growth of both production and new orders slowed but output still posted a solid advance in response to a decent rise in demand and renewed efforts to reduce backlogs. As a result, employment expanded for a seventh consecutive month and at its fastest rate so far in 2015.
Input costs increased for the first time in fifteen months on the back of a lower euro and companies felt confident enough about the strength of the market to raise their factory gate prices for a second month in a row.
Overall, the signs are that German manufacturing began the second quarter on a mildly upbeat note. Activity rates have cooled somewhat in recent months but orders growth remains positive and the sector's output should make a useful contribution to what look likely to be a reasonable increase in real GDP.
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.
Register for regular updates here and manage your email preferences.