EMU: PMI Manufacturing Index

Tue Dec 01 03:00:00 CST 2015

Consensus Actual Previous
Level 52.8 52.8 52.3

There were no revisions to the flash November PMI in the final data. At 52.8, the headline index remains 0.5 points above its final October level and at its strongest mark since April 2014.

Growth of production and new orders saw their fastest rates in around a year-and-a-half, the latter underpinned in no small way by the sharpest gain in exports since May. Backlogs also continued to climb while employment was up for a fifteenth successive month and more quickly than at any time since August.

However, despite the relative buoyancy of demand, price pressures continued to diminish. The rate of deflation for input costs and factory gate charges actually declined somewhat, but absolute falls in both indices underline the problems still facing the ECB in its efforts to achieve price stability.

Regionally, the strongest performer was Italy (54.9) ahead of the Netherlands (53.5) and Ireland (53.3). Spain (53.1) also had a respectable month as did Germany (52.9). However, Austria (51.4) was relatively sluggish, France (50.6) did little more than stagnate and Greece (48.1), despite registering an 8-month high again contracted.

The lack of any revision means that today's headline data are still consistent with annualised growth of Eurozone real GDP around the 2 percent mark. Manufacturing is expanding but clearly not fast enough given the general weakness of input costs to generate any inflationary pressures. Accordingly, given the ECB's limited remit, there is nothing here to dent expectations for more easing from the central bank on Thursday.

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.