FR: PMI Composite

Wed Jul 05 02:50:00 CDT 2017

Consensus Actual Previous
Composite - Level 55.3 56.6 56.9
Services - Level 55.3 56.9 57.2

The final composite output index for June weighed in at a surprisingly high 56.6, up fully 1.3 points versus its flash estimate and now just 0.3 points short of its final print in May.

The unusually large positive headline revision reflected a sharp, 1.6 point upward amendment to the services PMI which now stands at 56.9, also only 0.3 points short of its final mid-quarter outturn. Growth of new orders accelerated, backlogs also expanded again and sector headcount recorded its largest increase since March 2008. Business optimism about the year ahead slipped to a 4-month low but remained comfortably positive. Input costs continued to rise but service providers had to cut charges again in order to protect hard-won market share.

The final June PMI data paint a notably more upbeat picture of economic activity last month and should imply second quarter growth of around the 0.5 percent mark achieved at the start of the year.

The Composite Purchasing Managers' Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of around 750 manufacturing and service sector companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains the final estimate of the services PMI. The data are provided by Markit.

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 purchasing managers' manufacturing indexes, 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.