Both the Philly Fed and Empire State reports have been pointing to accelerating strength for the factory sector, as does Markit Economics' manufacturing PMI which comes in at 54.2 for the December flash. This index has been moving steadily higher from September's 51.5. Positives this month include a rise in hiring and a big build for inventories, one the report says reflects confidence in the outlook. New orders are solid but slowing due to weak foreign sales while growth in output is also slowing. Price data show pressure for input costs, especially steel, and slight improvement in selling prices which otherwise remain flat. The factory sector had been flat all year but looks to post solid numbers for the fourth quarter.
Based on monthly questionnaire surveys of selected companies, the Purchasing Managers' Manufacturing Index (PMI) offers an advance indication on month-to-month activity in the private sector economy by tracking changes in variables such as output, new orders, stock levels, employment and prices across manufacturing industries. The flash index, usually released about a week before the final, gives a preliminary reading of conditions for the current month.
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. The flash index, usually released about a week before the final, gives a preliminary reading of conditions for the current month.
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 in the U.S. and 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.