EMU: PMI Manufacturing Index

Mon Jun 01 03:00:00 CDT 2015

Consensus Actual Previous
Level 52.3 52.2 52.0

The final manufacturing PMI for May showed a minimal 0.1 point downward revision to its flash estimate to 52.2. This matched the 10-month high registered in March and was 0.2 points firmer than the final April print.

Manufacturing production expanded again, albeit at a slightly slower rate than last time, and both overall new orders and new export business improved suggesting that growth should be sustained over coming months. Increased demand was reflected in a rise in backlogs and also contributed to a ninth consecutive gain in the sector's headcount.

Input costs were up for the third month running and by the greatest extent since April 2012 reflecting euro weakness and recent hikes in oil prices. Even so, average factory gate charges were only unchanged although this masked increases in Germany, Italy and Spain.

Regionally, the best performing member state was Spain (55.8 and a 97-month high) ahead of the Netherlands (55.5) and Italy (54.8 and a 49-month high). Germany (51.1) was at least on the right of 50 but still recorded a 3-month low while France (49.4) again remained below the growth threshold despite registering a 12-month peak.

All in all, the May data should be consistent with a quarterly rate of growth in Eurozone industrial production of about 0.5 percent. However, such an outturn would be largely attributable to the relative buoyancy of the smaller member states as the contribution of both France and Germany looks likely to be very limited. Not for the first time, the lack of balance to the recovery is a worrying issue for Eurozone policymakers.

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.