US: PMI Manufacturing Index

Wed Jul 01 08:45:00 CDT 2015

Consensus Consensus Range Actual Previous
Level 53.7 53.4 to 55.2 53.6 54.0

The PMI manufacturing sample reports slowing growth in June, to an index of 53.6 vs 54.0 in May and vs the mid-month flash of 53.4. Subdued export demand remains a key negative for the sector, the result of weakness in foreign economies and also the negative effects of the strong dollar especially on European demand. Export orders have fallen for three straight months for the longest negative streak in nearly three years. Declining capital investment in the energy sector is another negative for the sector.

Growth in new orders did accelerate in June but only slightly while output softened. Backlogs are up, which is a positive, but is due in part to difficulties filling skilled positions. But the PMI sample is hiring with employment at its strongest level since September 2014.

Inflation readings are showing pressure for input prices, as have many other reports, but no pressure for finished goods, again in line with other surveys.

This report had been running hot compared to other manufacturing reports but has been moderating of late with June proving to be the softest month since October 2013.

Market Consensus Before Announcement
The PMI Manufacturing Index has been on the soft side as have most factory indicators. Still, new orders were strong in the flash report despite continuing export troubles tied to the strong dollar.

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.