US: PMI Manufacturing Index

Mon Aug 03 08:45:00 CDT 2015

Consensus Consensus Range Actual Previous
Level 53.8 53.5 to 54.0 53.8 53.6

Slow growth is the signal from this morning's manufacturing reports including the manufacturing PMI which came in at an as-expected 53.8 for final July. Improving domestic demand gave a boost to new orders as it did in this morning's ISM report while exports orders, unlike the ISM report, are showing a slight bounce back. Still, the report notes that exports are being held down by the strong dollar which is forcing manufacturers to focus their efforts on the domestic market.

Employment in this report is strong for another contrast with the ISM report. Price data in both reports are mute. The early signals from the manufacturing sector, including the run of regional Federal Reserve reports, point in sum to another flat month for manufacturing in July.

Market Consensus Before Announcement
Growth in the manufacturing PMI has been cooling this year, held down by reduced capital spending in the energy sector and general weakness in exports. Still this report, trending just under 55, has been consistently over-estimating growth in the manufacturing sector which has in fact been edging into the negative column over the last year.

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.