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FR: PMI Manufacturing Final
| Consensus | Consensus Range | Actual | Previous | |
| Index | 50.7 | 50.7 to 50.7 | 51.2 | 49.7 |
Highlights
The manufacturing sector improved in June despite a decrease in output and new orders during the month. The PMI rose to 51.2, moving into an expansionary phase, from 49.7 in May according to final results.
Preliminary estimates expected the reading to come it at 50.7, which was also the median of an Econoday survey of economists' forecasts.
It is relatively uncommon for the overall result to improve when production and new orders decline. They were lower due to challenging market conditions and inventory buildup. Inventories were being padded due to the outbreak of the hostilities in the Middle East as companies were racing to build stocks in anticipation of increased prices. Now they seem to be left holding the bag.
Demand from abroad is also weak, with all three major industrial branches reporting reduced demand from abroad. Adding to the woes are supplier delivery times which are the longest they have been in nearly four years.
On the positive side, employment improved and cost pressures eased for the first time since December. Business confidence for the coming 12 months also improved, with optimism at a 12-month high.
Despite the increase of the index into positive territory, depressed production and new orders are a worrisome sign which, if they don't improve in the coming months, will prove the increased optimism unfounded.
Market Consensus Before Announcement
The consensus looks for no revision in the June final from the June flash at 50.7, but up from 49.7 in May.
Definition
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 400 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 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 ISM manufacturing index in the U.S. and the S&P Global 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 S&P Global 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.