DE: PMI Manufacturing Index

Fri Apr 01 02:55:00 CDT 2016

Consensus Actual Previous
Level 50.4 50.7 50.5

The final PMI for March weighed in at 50.7, a 0.3 point gain versus its flash estimate but still close enough to the 50 growth threshold to suggest only a moderate rate of expansion in manufacturing activity. Indeed the March reading was only just above February's 15-month low.

Production expanded but only slowly and growth of new orders hit an 8-month trough. However, backlogs rose again and slightly more quickly than in February. Even so, headcount was trimmed for a second successive month although cuts were only marginal and largely linked to the expiration of temporary contracts.

Inflations news was again very soft. Hence, input costs fell at one of the sharpest rates since 2009 and factory gate prices were reduced at their fastest pace in six years.

Slowing orders growth and a declining workforce point to a sluggish near-term outlook for German manufacturing output. Moreover, price trends continue to move in the wrong direction. Should today's survey results prove accurate, the service sector will need to perform well just to sustain first quarter real GDP growth at the fourth quarter's subdued 0.3 percent rate. In practice however, the hard data so far have been rather more upbeat so the March findings need to be treated with care.

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.