EMU: PMI Manufacturing Index

Mon May 04 03:00:00 CDT 2015

Consensus Actual Previous
Level 51.9 52.0 52.2

There were no significant changes to the flash April manufacturing PMI in the revised report. At 52.0, the final level was just 0.1 points above its flash estimate and 0.2 points below its final March outturn.

Manufacturing production rose again but at a slightly slower rate than the 10-month high recorded in March while new orders were up for a fifth time in a row. Employment advanced for an eighth straight month and at its quickest pace since August 2011. Inflation developments were also more positive. Hence, input costs increased for a second successive month after a 6-month sequence of declines while, more importantly, factory gate prices edged higher for the first time since August 2013.

Regionally, the best performer was Ireland (national PMI 55.8) ahead of Spain (54.2) and the Netherlands (54.0). Italy (53.8) managed a 12-month high and remained above both Germany (52.1) and France (48.0), the latter once again the only member of the larger group of countries to post a sub-50 reading. Elsewhere, Greece (46.5) ominously dropped to a 22-month low.

In aggregate, the latest results should be consistent with quarterly growth of Eurozone real GDP close to the 0.4 percent mark. The ECB would certainly like to see something rather stronger but with tentative signs that deflationary pressures may finally be on the wane, the central bank should not be too unhappy with April's developments.

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.