US: PMI Manufacturing Index Flash


Fri Oct 23 08:45:00 CDT 2015

Consensus Consensus Range Actual Previous
Level 53.0 51.5 to 54.3 54.0 53.0

Highlights
In a surprise upturn boosted by domestic demand, the manufacturing PMI is signaling monthly strength, coming in at 54.0 for the October flash for the best showing since May. The result is exactly 1 point over both the Econoday consensus and the September flash and 9 tenths over the final reading for September.

New orders are at a seven-month high and are described as strong despite only a modest contribution from export orders. Production this month is also at a seven-month high. Hiring is up from September's 27-month low.

Manufacturers in Markit's sample remain cautious about inventories which decreased for a third straight month. Input costs are down due to the strong dollar and falling raw material prices especially for steel. Finished prices are steady at a 37-month low.

This report conflicts with the regional manufacturing reports which so far are pointing to another weak month for October. And this report typically runs hot compared not only to other reports but most importantly to government data which, unlike this report, have been in contraction for the last year. Watch for the Dallas and Richmond Fed reports early next week to see if strength in this report is confirmed.

Market Consensus Before Announcement
The manufacturing PMI flash has been holding safely above the breakeven level of 50 but has nevertheless been inching to 2-year lows, the result of weak foreign demand and general caution among customers. Orders, production, and employment have all been slowing while price readings have been sliding. Forecasters see the October flash coming in little changed at 53.0. Though levels in this report have been holding in the plus column, actual factory orders and shipments as tracked by the government have been edging into contraction over the past year.

Definition
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. The flash index, usually released about a week before the final, gives a preliminary reading of conditions for the current month.

Description
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. The flash index, usually released about a week before the final, gives a preliminary reading of conditions for the current month.

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.