January's global manufacturing PMI reading was 52.7 for a second month at a 34 month high and was above its long-run average of 51.4. The improvement in business conditions was led by the investment goods sector, where the PMI rose to its highest level in over five-and-a-half years. The improvement at consumer goods producers was up from December while growth in the intermediate goods category lost some momentum.
Manufacturing production increased for the fifty-first successive month. Among the larger industrial nations for which data were available, faster rates of expansion occurred for the US, the euro area and the UK. Growth slowed in Japan, while South Korea, Brazil, Turkey and Greece where the only nations to register contractions.
Among the sub-indices, output and output prices were up but at a slower rate while new orders, new exports and input prices were rising at a slower rate. Employment increased at the same rate.
J.P. Morgan Global Manufacturing PMI gives an overview of the global manufacturing sector. It is based on monthly surveys of over 10,000 purchasing executives from 32 of the world's leading economies, including the U.S., Japan, Germany, France and China which together account for an estimated 89 percent of global manufacturing output. It reflects changes in global output, employment, new orders and prices. The Global Manufacturing PMI is seasonally adjusted at the national level to control for varying seasonal patterns in each country and is produced by J.P. Morgan and Markit Economics in association with ISM and the International Federation of Purchasing and supply Management (IFPSM).
Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. The J.P. Morgan Global Manufacturing PMI provides advance insight into the global manufacturing sector, which gives investors a better understanding of business conditions and valuable information about the economic backdrop of global markets. The stock market likes to see healthy economic growth because that generally 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 PMI data are also used by many Central Banks to help make interest rate decisions.
The J.P. Morgan Global Manufacturing PMI data give a detailed look at the manufacturing sector including the pace of manufacturing growth and the direction of growth for this sector. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. In addition, its sub-indexes provide a picture of output, employment, new orders and prices.
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