DE: PMI Manufacturing Index

Mon Aug 03 02:55:00 CDT 2015

Consensus Actual Previous
Level 51.5 51.8 51.9

Manufacturing activity was a little stronger than originally thought in July. At 51.8, the final print for last month was 0.3 points above its flash reading and just a tick below its final mark in June.

Production was up for a twenty-seventh successive month and at much the same rate as in June. Importantly, new business also remained on an upswing albeit with its pace of expansion down fractionally on last time. The increase in new orders was wholly attributable to the domestic market as overseas demand recorded its first decline since January. Backlogs were little changed but the rate of job creation touched a 3-month high, in large part due to increased hiring by consumer goods producers. Purchasing activity increased but at a marginally softer rate than in June and falling inventories pointed to some caution about the outlook.

Input costs were up for a fourth consecutive month and some firms raised product prices.

Manufacturing began the third quarter on a relatively sluggish note. Output and orders are both moving in the right direction but the growth rates of both remain below their respective long-run averages. However, at least deflationary pressures look to be subsiding even if a return to more normal levels of CPI inflation is probably still some while away.

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.