EMU: PMI Manufacturing Index

Mon Oct 02 03:00:00 CDT 2017

Consensus Actual Previous
Level 58.2 58.1 57.4

The final sector PMI for September was 58.1, down just a tick from its flash estimate and a 79-month high.

The lack of any significant headline revision meant that the bullish picture already painted by the preliminary results still stands. Hence, output grew at its fastest rate in nearly six-and-a-half years, backlogs rose again and job creation posted a new survey record. Business optimism registered its second most optimistic reading since the data were first compiled in July 2012. At the same time, input cost inflation picked up to a 5-month high while factory gate prices advanced for the twelfth month running and also at the fastest pace since April.

Regionally, the improvement in activity rates was reassuringly broad-based. In terms of national PMIs the best performer was Germany (60.6) ahead of the Netherlands (60.0) and Austria (59.4). Italy (56.3) and France (56.1) were not far behind and Ireland (55.4) and Spain (54.3) also saw decent growth. Even Greece (52.8) recorded an 11-month peak.

The September figures put the average Eurozone third quarter PMI at 57.4, its best outturn since the opening quarter of 2011. With inflation trends also apparently on the up, the ECB should be quite content.

The Manufacturing Purchasing Managers' Index (PMI) provides an estimate of manufacturing business activity for the preceding month by using information obtained from a representative sector survey incorporating around 3,000 companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). Released by Markit, national data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. These countries together account for an estimated 89 percent of Eurozone manufacturing activity.

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.