FR: PMI Manufacturing Index

Wed Jul 01 02:50:00 CDT 2015

Consensus Actual Previous
Level 50.5 50.7 49.4

The flash PMI was revised up 0.2 points to 50.7 in the final report. This was 1.3 points stronger than its final May print and the first reading above the 50 expansion threshold in some fourteen months. However, the current level was still indicative of only a very modest rate of growth.

Output was little changed on the month following a year of contraction and reflected an easing in the rate of decline in overall new orders within which exports were broadly flat. Even so, employment continued to fall for a fifteenth successive month.

Input costs were up for a third month running and the rate of cost inflation climbed to its highest mark in more than three years, helped by a weak exchange rate. However, more importantly, output prices extended the current period of decline to fully sixteen months in the wake of ongoing strong competitive pressure.

Today's data add little to the flash results released last month. Manufacturing may have turned the corner but a respectable increase in business activity still seems a long way off and deflationary pressures continue to threaten.

The Purchasing Managers' Manufacturing Index (PMI) 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.