Manufacturing PMI: An Early Look at Sector Performance

The Manufacturing Purchasing Managers’ Index (PMI) is an economic indicator that provides an early overview of the performance of the manufacturing sector in a particular country or region. It is released before the final PMI data and is based on a preliminary survey of purchasing managers in manufacturing companies.

Here are the key points about Flash Manufacturing PMI:

Definition: The manufacturing PMI is a composite index derived from surveys conducted among purchasing managers in manufacturing companies. It measures working conditions in the manufacturing sector, including factors such as production, new orders, employment, supplier delivery and inventories..

Timing: The rapid manufacturing PMI is released ahead of the final PMI reading, providing an early indication of economic activity in the manufacturing sector for a given period. It provides timely insights into business conditions and can help anticipate potential changes in economic trends.

Survey Methodology: Purchasing Managers’ Index (PMI) surveys are usually conducted by private companies or research agencies. Purchasing managers are required to present their assessments of various business indicators, usually on a scale of 0 to 100. A reading above 50 indicates expansion in the manufacturing sector, while a reading below 50 indicates contraction..

Key Pointer: Flash Manufacturing PMI is a leading indicator because it reflects the views of purchasing managers with insights into their companies’ order books, production plans, and supply chain dynamics. Changes in the PMI can provide early signals of shifts in economic activity and business sentiment.

Market Impact: The fast manufacturing PMI is closely monitored by financial market participants, including traders, economists and investors. A higher-than-expected PMI reading suggests a stronger manufacturing sector, which could positively impact the country’s currency, stock markets and bond yields. Conversely, a lower-than-expected reading may trigger market reactions, reflecting potential concerns about growth. Economic.

US private sector PMI rose in June

The US S&P Global Composite Purchasing Managers’ Index rose to 54.6 in the preliminary estimate for June from 54.5 in May, showing that private sector business activity in the US continued to expand at a healthy pace.

The S&P Global manufacturing PMI rose to 51.7 in the same period from 51.3, while the services PMI rose to 55.1 from 54.8. Both readings were higher than analysts’ estimates.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said when evaluating the survey results, “Early PMI data points to the fastest economic expansion in more than two years in June, signaling an encouraging strong end to the second quarter.”

Regarding inflation dynamics, Williamson added: “At the same time, selling price inflation slowed again after rising in May, falling to one of the lowest levels seen in the past four years,” and continued: “Historical comparisons suggest that the recent decline raises the survey price in line with the Fed’s inflation target of 2%.”

Market Reaction to US PMIs

The US dollar has gathered its strength against its rivals with an immediate reaction. At the time of writing, the US dollar index was up 0.2% on the day at 105.85.

S&P Global will release a quick estimate of US purchasing managers’ indices (PMIs) for June, a monthly survey of business activity, on Friday. The survey is expected to show that economic activity in the private sector continues to expand at a moderate pace.

In May, the S&P Global Composite PMI improved to 54.5 from 51.3 in April. The manufacturing PMI rose to 51.3 from 50.0, while services PMI rose to 54.8 from 51.3. Assessing the survey results, ” economic improvement in US accelerated again after two months of slowing growth, with early PMI data pointing to fastest expansion in just over two years in May.”

Positive PMI outlook pushes dollar higher

The Flash manufacturing PMI is usually released a few weeks before the final PMI data. The final PMI includes a larger sample size and more comprehensive survey responses. While a quick reading provides an early estimate, the final PMI provides a more complete picture of the manufacturing sector’s performance.

USDJPY rose back to the uptrend and returned above the 159.00 level after the stronger-than-expected quick data from the S&P Global Manufacturing and Services Index. The trading price rose to 159.206. This results in it reaching 100 pips below the 2024 high of 160.208. The highest level was back in 1991 when the high price reached 160.40 .However, the last two declines have found support for buyers against those moving averages at 158.916. This increases the importance of levels to move forward at least in the short term.

As long as the price can stay above the bias in the short term it is more bullish. If the price moves below, be prepared for buyers to turn into sellers at least in the short term.

Regarding inflation dynamics, Williamson noted that selling price inflation picked up in May. “The main inflationary driver now comes from manufacturing rather than services, which means that inflation rates for costs and selling prices are now fairly high by pre-pandemic standards in both sectors to suggest that the recent tilt down to the Fed’s 2% target still seems clear. Elusive “, he explained further.

The Flash Manufacturing PMI is an important economic indicator that provides an early assessment of the performance of the manufacturing sector. It is closely monitored by market participants because it can provide insights into economic growth, business sentiment, and potential market movements.

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