GB: CIPS/PMI Manufacturing Index

Wed Nov 01 04:30:00 CDT 2017

Consensus Actual Previous Revised
Level 55.8 56.3 55.9 56.0

The manufacturing sector started the fourth quarter on a solid footing. The October manufacturing PMI reading was 56.3, up from September's final revised reading of 56.0. Both production and new order volumes continued to rise at robust rates, as companies benefited from strong domestic market conditions and rising inflows of new export business thanks to the weaker pound sterling.

The manufacturing PMI has now signaled expansion for 15 consecutive months. The expansion was broad-based by sub-sector, with consumer, intermediate and investment goods producers all registering output growth. Price pressures remained elevated, however, with rates of inflation in input costs and output charges both accelerating and staying well above historical series averages.

Intermediate and investment goods producers experienced both rising production volumes backed up by strong and accelerated new business. Conditions seemed less firm for consumer goods as new orders growth eased to a seven-month low and business optimism to its weakest level in the year-to-date.

Total new orders volumes picked up during October, recovering part of the growth momentum lost in September. The domestic market was the prime source of new contract wins, although new export business also continued to rise (albeit at the weakest pace in four months). Employment continued to grow, improving to a 40 month high.

In October, manufacturing rebounded from its September dip. Pressure on capacity continued as evidenced by vendor delivery times. This report will probably bolster speculation about a BoE rate increase at tomorrow's policy meeting.

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.