| Actual | Previous | |
| Composite Index | 47.6 | 48.3 |
| Manufacturing Index | 52.8 | 50.2 |
| Services Index | 46.5 | 48.3 |
Highlights
The composite PMI fell to a 14-month low of 47.6 in April despite a substantial increase in the manufacturing sector, with services acting as a heavy counterweight.
While the manufacturing component reached a 47-month high of 52.8 after a reading of 50.0 in March, the services index fell to a 14-month low of 46.5 in April following a reading of 48.8 in March.
The results are, however, deceptive for manufacturing and mask underlying problems. On the surface, the result looks impressive, but is the result of customers positioning their businesses in anticipation of higher prices, shortages of materials, and logistical bottlenecks. Manufacturers have been building inventories, with order books rising for the first time in nearly four years.
Prices are increasingly becoming an issue, particularly for manufacturing, with the gap to services a 13-point differential. Companies cited higher energy costs and fuel along with chemicals and metals. Still, they seem reluctant at this point to pass substantial price gains to customers.
With the conflict in the Middle East now in its second month with no substantial signs of easing up, the coming months will add further challenges. The second quarter is shaping up to have an overall negative impact on GDP. While inventories will likely be a positive for GDP, the fact remains that consumer spending will likely offset that.
Definition
The flash Composite Purchasing Managers' Index (PMI) provides an early estimate of current private sector business activity by combining information obtained from surveys of around 1,000 manufacturing and service sector companies. The flash data are released around ten days ahead of the final report and are typically based upon around 85 percent of the full survey sample. Results covering a range of variables including manufacturing output, employment, new orders, backlogs and prices 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 report also contains flash estimates of the manufacturing and services PMIs. The data are produced by S&P Global.
Description
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 purchasing managers' manufacturing indexes, 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.