US: PMI Manufacturing Index

Mon Nov 02 08:45:00 CST 2015

Consensus Consensus Range Actual Previous
Level 54.1 53.0 to 54.5 54.1 53.1

Most measures of the U.S. factory sector are in contraction or, like the upcoming ISM report, in near contraction, but not the manufacturing PMI which continues to post solid rates of growth. In the best reading since April, the PMI came in at 54.1 for final October for a 1 tenth gain from the flash reading and a very definitive 1.0 point gain from September.

Output is described as "robust" while new orders are accelerating as are, in what is a real contrast with other manufacturing reports, backlog orders where the build is contributing to strength in the sample's employment. Delivery times are up, which is another indication of strength. Input prices are down sharply while finished goods prices are fractionally higher.

This report, though on its own in terms of direction, at least has been consistent, never coming close to contraction over a year of actual contraction. A dead even 50.0 reading is expected for the ISM at 10:00 a.m. ET this morning.

Market Consensus Before Announcement
The manufacturing PMI stands in direct contrast with the sweep of Federal Reserve regional surveys. At 54.0, the manufacturing PMI flash for October posted its best reading since May. New orders were at a 7-month high as was production. Regional Fed surveys have instead been showing wide contraction. Little change is expected for the final PMI, at 54.1.

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.