DE: PMI Manufacturing Index

Mon Oct 02 02:55:00 CDT 2017

Consensus Actual Previous
Level 60.6 60.6 59.3

The flash PMI was unrevised in the final data for September. Consequently, at a more than healthy 60.6, the headline index again signalled the best all-round performance by manufacturing in more than six years.

Output grew at its fastest rate since April 2011 and with order books boosted by overseas demand and backlogs sharply higher, looks set for further solid gains through to year-end. Against this backdrop, job creation climbed to its strongest reading since May 2011 while business confidence in the year ahead touched a 3-month peak.

Supply shortages helped drive up input costs and the rate of cost inflation reached a 5-month high. The combination of strong cost pressures and supportive demand conditions also prompted the sharpest hike in factory gate prices since mid-2011.

The final September report would seem to confirm that German manufacturing closed out the third quarter on a very solid footing and with more than enough momentum to ensure a good fourth quarter too. With inflation pressures also building, the ECB should be happy enough.

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 500 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 data are released 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 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.