DE: PMI Manufacturing Index

Thu Mar 01 02:55:00 CST 2018

Consensus Actual Previous
Level 60.3 60.6 61.1

Manufacturing activity in February was a little firmer than originally reported according to the revised PMI results. At 60.6, the final headline index was up 0.3 points versus its flash level and just 0.5 points short of its final January mark. The latest reading continues to paint a picture of boom conditions in the sector.

Output, employment and new orders all still show slower growth rates than at the start of the year but not to the extent that would undermine expectations for a bullish first quarter. Indeed, output saw one of its most marked gains since early 2011 and job creation was close to a record high. Business confidence slipped to a 3-month low but remained historically firm.

However, price pressures continued to build with input cost inflation was the third highest since April 2011, in part reflecting the largest monthly increase in average lead times ever recorded. As a result, factory gate inflation rose to a level not seen in nearly seven years.

February's final PMI survey hints at some very minor cooling in manufacturing activity last month and leaves intact a picture of solid and broad-based momentum. Despite little evidence so far in the hard data, price pressures are building and, in the absence of a significant slowdown in growth, the sector looks set to give CPI inflation a boost before very long.

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.