EMU: PMI Manufacturing Index

Mon Nov 02 03:00:00 CST 2015

Consensus Actual Previous
Level 52.0 52.3 52.0

The final Eurozone manufacturing PMI stood at 52.3 in October, up 0.3 points from both its flash estimate and its final September mark.

Output expanded for a twenty-eighth month in a row, underpinned by a stronger gain in new orders within which exports saw their steepest rise since June. Backlogs also continued to accumulate. Meantime, employment was up for a fourteenth consecutive month but only modestly and the rate of job creation slipped to its weakest since February. Inflation developments were soft across the board with input costs falling by the greatest extent in nine months and factory gate prices down for a second successive month.

Regionally the best performer was Italy (54.1 and a 3-month high) ahead of the Netherlands (53.7) and Ireland (53.6). Germany (52.1) disappointed with a 3-month low as did Spain (51.3) which saw its weakest posting in nearly two years. France (50.6) was unchanged from September and so still indicative of little more than stagnation.

Overall, Eurozone manufacturing remains worryingly sluggish. Today's data point to annual growth of manufacturing output of only about 2 percent despite the substantial amount of policy stimulus already provided by the ECB. Germany and France are a concern and without some improvement here it is difficult to see the goods producing sector providing Eurozone GDP growth with much of a lift over coming months. Taken together with another deflationary update on pipeline price pressures, there is nothing here to knock speculation about another wave of ECB easing before year-end.

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.