GB: CIPS/PMI Manufacturing Index

Mon Oct 02 03:30:00 CDT 2017

Consensus Actual Previous Revised
Level 56.3 55.9 56.9 56.7

UK manufacturing performed a little worse than expected in September. However, although at 55.9, the sector PMI was down 0.8 points versus a slightly weaker revised August outturn, it remained within shouting distance of its recent highs and firm enough to indicate another solid period for business activity.

Growth of output and new orders were again healthy but at lower rates than in mid-quarter. Export business was supported by sterling weakness and orders from overseas expanded at close to a six-and-a-half-year peak. Moreover, headcount increased at a rate that was only just short of August's 3-year record and business confidence in the coming year remained positive.

Meantime, input costs and factory gate prices both rose at accelerated rates, the former reflecting rising commodity prices, the exchange rate and increasing supply-chain constraints.

Despite its dip, the September PMI still compares very favourably with its long-run average (51.7). Consequently, with growing signs of mounting pressure on capacity - vendor delivery times lengthened to the greatest extent since April 2011- today's report will probably bolster speculation about a BoE rate hike next month.

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). The survey covers more than 600 industrial companies and is compiled by the Chartered Institute of Purchasing and Supply (CIPS) and 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 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.