|Level||54.5||53.8 to 55.0||52.6||54.0|
Markit's U.S. manufacturing sample is finally reporting weakness, weakness long registered across the breadth of other manufacturing data. The manufacturing PMI, at 52.6 for the November flash, is still above 50 to indicate monthly growth but the rate of growth is the slowest for this sample in more than two years, since October 2013. Growth in new orders is also the slowest in just over two years with respondents citing special weakness in exports which, hit by the strong dollar and weak global demand, dipped back into the contraction column in the month. Markit's sample still, however, reports a "robust" rate of production which is a positive indication for November industrial production.
Other readings include the first drop in a year for backlog orders and a fourth straight dip for finished goods inventories. Price data show contraction for inputs, one tied to lower transportation and commodity prices, and little change for finished goods prices. A sign of strength comes from another gain for employment, again in contrast to other data.
Everything is relative and the slowing in this report could lower expectations for other factory data. Watch tomorrow's calendar for data on goods exports and the latest factory news from the Richmond Fed.
Market Consensus Before Announcement
Unlike most other measures, the manufacturing PMI has not been signaling contraction for the sector. Far from it, with the index trending near the mid 50s and a 54.5 reading expected for the November flash. Regional reports on November activity have been constructive including the closely watched Philly Fed which moved back over breakeven. But the manufacturing PMI has been well above breakeven, in fact never approaching its 50 breakeven mark while the factory sector in fact has been in contraction all year. But the text of this report did describe October production as "robust" which, if not quite robust, was confirmed by a solid rise in the manufacturing component of the industrial production report.
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.
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.