German manufacturing performed a little better than originally thought in November, At 52.9, the final sector PMI for the month was 0.3 points above its flash estimate, 1.8 points higher than its final October reading and at a 3-month high.
Production growth also saw a 3-month peak and new business inflows were strong, notably from overseas where the rise was the largest in twenty-one months. Against this backdrop, fresh indications of pressures on capacity were provided by the second sharpest increase in backlogs in twenty months despite the largest rise in employment since August.
Although input costs declined for a fourth straight month, factory gate prices rose for the first time in three months. However, the rate of output price inflation was only fractional.
Overall, the signs are that German manufacturing was in reasonable shape in mid-quarter although recent PMI results have tended to be overly optimistic compared with the official data. Somewhat surprisingly, there appears to have been little impact so far from the VW emissions' scandal but this could still emerge over the course of the coming months. Goods production should make a positive contribution to fourth quarter real GDP growth but it will likely need a stronger services sector if momentum is to move up a gear.
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.
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