EMU: PMI Manufacturing Index

Fri Dec 01 03:00:00 CST 2017

Consensus Actual Previous
Level 60.0 60.1 58.5

The final PMI data would seem to confirm a very solid performance by Eurozone manufacturing in November. At 60.1, the headline activity index was a tick firmer than its flash estimate and 1.6 points above than its final reading in October. It was also only just short of a record high.

Output posted its fastest growth since February 2011 and new orders saw their best performance since April 2000 on the back of healthy domestic and overseas demand. Exports rose more sharply than in any other month in the survey's history. Backlogs similarly recorded a record gain and that despite a record surge in sector headcount.

Meanwhile, inflation pressures continued to build and input costs climbed by the most in more than six years while factory gate inflation was the highest since June 2011. Vendor delivery times lengthened significantly.

Regionally, the best performer was Germany (62.5) ahead of the Netherlands (record 62.4) and Austria (record 61.9). Italy (58.3) and Ireland (58.1) were not far behind, nor were France (57.7) and Spain (56.1). Greece (52.2) lagged but was at least well above the 50 growth threshold.

The final November PMI data are unambiguously bullish about both the current state of Eurozone manufacturing and the outlook. It should be only a matter of time before this becomes more fully reflected in stronger output price inflation.

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.