EMU: PMI Manufacturing Index

Thu Mar 01 03:00:00 CST 2018

Consensus Actual Previous
Level 58.5 58.6 59.6

The flash sector PMI was revised just a tick firmer to 58.6 in the final report for February. This leaves a 1 point drop versus its final January mark but still easily a high enough reading to signal a very good month for manufacturing activity.

As indicated in the preliminary results, output, employment and new orders all saw smaller gains than at the start of the year but all continued to move in the right direction. In particular, the increase in headcount was only slightly below the record rises achieved in November and December. Not surprisingly, business confidence remained strong and although the overall degree of positive sentiment eased slightly, it was still close to January's series peak.

Meantime, with delivery times continuing to lengthen sharply, input cost inflation eased slightly from January's 81-month high but stayed marked overall. More significantly, factory gate prices rose at their quickest pace in almost seven years.

Regionally the strongest performer was the Netherlands (63.4) ahead of Germany (60.6) and Austria (59.2). Italy (56.8) and Ireland (56.2) were some way behind while Greece (56.1) weighed in ahead of Spain (56.0) and France (55.9).

Eurozone manufacturing had another very good month if the PMI results are to be believed. However, there are some indications that growth is starting to cool a little and, if confirmed, this could help to alleviate what appears to be steadily building pressure on output prices. The ECB will be hoping that economic momentum remains strong enough to ensure that this is not the case.

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.