EMU: PMI Manufacturing Index

Thu Oct 01 03:00:00 CDT 2015

Consensus Actual Previous
Level 52.0 52.0 52.3

There were no changes to the flash headline index in the final PMI data for September. At 52.0, the overall activity measure continues to point to a modest pace of manufacturing growth albeit at a slightly reduced rate versus August (final 52.3).

Output rose for a twenty-seventh successive month, reflecting further growth of new business and an additional accumulation of backlogs. New exports orders were again robust. Job creation was positive for a thirteenth straight month although the addition to headcount eased to a 4-month low. Meantime, price pressures diminished as input costs fell at the fastest pace in eight months, mainly on the back of weaker oil prices. In turn, factory gate prices decreased for the first time in half a year.

Regionally, Ireland (53.8) was the strongest performer ahead of the Netherlands (53.0) and Italy (52.7). Germany (52.3) was in the middle of the pack but France (50.6), despite moving back into positive growth territory, was again well below the Eurozone average.

The unrevised headline leaves the average third quarter EMU PMI at 52.3, equalling its second quarter outturn. However, promisingly, the mean values for both the output and new orders sub-indices were slightly higher than in April-June. Accordingly, the signs are that while third quarter GDP growth should be much the same as the previous period's 0.4 percent quarterly rate, the new quarter could be a touch firmer. Even so, something rather faster is probably required if the ECB is to get anywhere near achieving its HICP inflation target in the foreseeable future.

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.