EMU: PMI Manufacturing Index

Tue Sep 01 03:00:00 CDT 2015

Consensus Actual Previous
Level 52.4 52.3 52.4

Eurozone manufacturing performed much as originally estimated last month according to the sector's final PMI data. At 52.3, the headline index was just a tick below its flash reading and also only 0.1 points below its final mark in July.

As previously indicated, production and new business recorded solid gains. Indeed, rate of increase of the former reached its highest level since May 2014 while the latter saw its strongest pace since April that year. Domestic and overseas markets contributed to the advance in new orders which was complimented by a fourth consecutive increase in backlogs, their sharpest gain since April last year. Job creation was the most marked in some four years.

Input costs fell for the first time in six months but factory gate prices were up, albeit only marginally, for the fourth time in the past five months.

Regionally the best performer was the Netherlands (53.9 but a 5-month low) ahead of Italy (53.8 and a 4-month low) and Ireland (53.6 and an 18-month low). Amongst the larger countries Germany (53.3) secured a 16-month high but Spain (53.2) touched a 10-month low and, most worryingly France (48.3) a 4-month low.

The recovery in Eurozone manufacturing seems to be gaining some traction and whereas growth appears to be slowing in some of the smaller member states, the gap here is being filled by faster activity rates in Germany. That said, on current trends annualised third quarter Eurozone industrial production growth should be only around the 2 percent mark, a useful step-up from recent quarters, but still disappointingly sluggish. However, at least some signs of a return to positive factory gate inflation should go down well at the ECB.

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.