ALL: Global Manufacturing PMI

January 3, 2017 10:00 CST

Actual Previous
Level 52.7 52.1

December readings for the global manufacturing PMI improved across the board. The headline index reading was 52.7, up from 52.1 in November and its highest level since February 2014. All subcategories including output, new orders, new exports, employment and input and output prices climbed at a faster pace.

Growth was recorded across the consumer, intermediate and investment goods sectors in December with expansion improving in all three categories. Over 2016 as a whole, growth was above that registered in 2015 in the intermediate goods industry, but slower at producers of consumer and investment goods.

Growth was generally led by the US and Western Europe regions. The PMI readings for the US and the Eurozone rose to 21 month and 68 month highs respectively, while the UK PMI registered its best level in two-and-a-half years. Underlying the improvement in the euro area were stronger expansions in almost all of the nations of the currency union covered by the global PMI (the sole exception was Greece).

Asia also improved, as PMI readings signaled growth in Japan, China, Taiwan, Vietnam, Philippines and Thailand. However, nations registering contractions were also more prevalent in Asia, with declines indicated in India, South Korea, Indonesia, Malaysia and Myanmar. Elsewhere in the global manufacturing sector, the upturn in Russia gathered pace and the downturn in Brazil accelerated.

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.