|Level||54.2||54.0 to 55.5||53.4||53.8|
The PMI manufacturing index came in lower-than-expected in the June flash reading, at 53.4 and below the Econoday low-end estimate for 54.0. This is the weakest reading since October 2013.
But, importantly, the slowing isn't centered in orders where growth picked up slightly in the month, but instead is centered in production growth which show the weakest readings since January 2014. Employment growth, like orders, is also strong.
The report cites caution on the business outlook and specifically caution on the impact of the strong dollar on exports. But export orders themselves are stable in the latest reading but follow contraction in May and April.
Another area of concern is energy equipment where investment, because of low oil prices, has turned down sharply. Supply constraints tied to the first-quarter port strike appear to have completely unwound based on the first improvement in delivery times this year. Price readings in today's report are benign.
This report has been consistently running hot compared to other manufacturing reports and is now coming back to the pack. Coming up at 10:00 a.m. ET is the Richmond Fed's report for June.
Market Consensus Before Announcement
The PMI manufacturing index has been running hot compared to other data on the sector but the sample did report a fall off in orders during May that was tied to directly to weak exports. Exports are posing a serious risk to the economic outlook and direct commentary on this topic is likely in this report.
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. The flash index, usually released about a week before the final, gives a preliminary reading of conditions for the current month.
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. The flash index, usually released about a week before the final, gives a preliminary reading of conditions for the current month.
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.