The final manufacturing PMI weighed in at 53.2, up 0.2 points from its flash estimate and its strongest reading in four months.
Growth of both output and new orders accelerated slightly and backlogs continued to rise despite a fifteenth consecutive increase in employment. New export orders recorded their sharpest gain in nearly two years and strengthening demand saw post-production inventories decline for the second month running and at their steepest rate since March.
Input costs were dragged lower by falling energy and some other raw material prices but this was not passed on in factory gate charges which were essentially unchanged versus November.
The December data indicate a solid platform upon which German manufacturing can start 2016. Respectable growth of new orders should see a decent gain in industrial output this quarter and, despite clear signs of rising pressure on capacity in some subsectors, in the main inflationary trends would seem to be quite light. However, should oil prices rebound over coming weeks and months firms are likely to be quite quick to raise their selling prices.
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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