DE: PMI Composite

Tue Jun 05 02:55:00 CDT 2018

Consensus Actual Previous
Composite - Level 53.1 53.4 54.6
Services - Level 52.1 52.1 53.0

The flash composite output index was revised just 0.3 ticks firmer to 53.4 in the final survey data for May. However, this left a 1.2 point decline versus its final April print and signals the least impressive increase in overall business activity in twenty months.

The limited adjustment to the headline index masked no change to the flash services PMI which was unrevised at 52.1, a 0.9 point drop its final April mark and also its lowest reading since September 2016. Moreover, the smallest increase in new orders in more than four years argues against any near-term turnaround. Headcount similarly expanded at a reduced, albeit historically still solid, rate and growth of backlogs also moderated. Not surprisingly, business confidence in the year ahead deteriorated. Input costs and output prices climbed quite sharply.

The final May results seem to have been impacted negatively by holiday timings. Nonetheless, the likelihood of the economy this quarter rebounding significantly from its sharp first quarter slowdown would appear very limited at best.

The Composite Purchasing Managers' Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of around 1,000 manufacturing and service sector companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains the final estimate of the services PMI. The data are provided by Markit.

The Purchasing Managers Index (PMI) survey has developed an outstanding reputation for providing the most up-to-date possible indication of what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices. The indices are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries (including the European Central Bank) use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.