EMU: PMI Manufacturing Index

Wed Jul 01 03:00:00 CDT 2015

Consensus Actual Previous
Level 52.5 52.5 52.2

The final manufacturing PMI for June weighed in at 52.5, unrevised from its flash estimate and just 0.3 points above its final reading in May.

Production equalled its fastest growth in more than a year as the rate of increase in new orders matched May's 13-month record. There were gains in both domestic and overseas demand alike. Backlogs were also higher and headcount expanded for a tenth successive month and at its second fastest rate in nearly four years.

Cost inflation slowed from May's 3-year high but remained solid in respect of recent oil price hikes and more general costlier imports due to the euro's depreciation. Factory gate prices increased for a second time in the last three months but remained constrained by tight market conditions.

Regionally, the best performer was the Netherlands (56.2 and an 18-month high) ahead of Ireland (54.6) and Spain (54.5). Italy (54.1) also had another good month but Germany (51.9) and France (50.7) combined to ensure another disappointing performance by the core.

The second quarter saw the strongest growth of Eurozone manufacturing activity for a year. Outside of Greece all member states posted positive rates of expansion with France moving above zero for the first time in fourteen months. Even so, the core remains sluggish and in sum, the latest results suggest a quarterly increase in manufacturing output of only around 0.3 percent. If so, faster GDP growth last quarter will be largely dependent upon a stronger service sector.

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.