Contrasting with several other recent reports, Markit announced that overall manufacturing activity picked up in January. The Flash Purchasing Managers’ Index (PMI) rose from 54.2 in December to 56.1 in January. It was the third month in a row of consecutive gains in the index, with stronger sales pushing sentiment higher.
The index for new orders increased from 54.7 to 57.7, the fastest pace since December 2011. Export orders were not as strong (down from 52.8 to 51.3), but were not contracting as they were just two months ago.
Other measures were also positive. Both output and employment were growing at a faster pace. Inventories were mixed, with raw material supplies growing again, after shrinking for five straight months, as well as finished goods contracting which was nearly unchanged from the month before). Meanwhile, pricing pressures remain modest.
Overall, the Markit PMI data show that manufacturers have begun the new year with more optimism than in previous months. It is notable that the Markit data vary from other sources, including the Institute of Supply Management’s PMI data, in that its index never fell below 50 – the threshold for contracting levels of activity. Nonetheless, the upward momentum seen in the Markit data should bode well for improvements in the ISM PMI data, which is scheduled to be released on February 1.
On the international front, Markit also released data today for Europe and China. The underlying message remains consistent with what we wrote about in the latest Global Manufacturing Economic Update, which came out earlier this month. We have seen improvements in many part of the world, including China, with Europe and Japan continuing to struggle.
The Flash PMI data for Europe and China show that this trend continues. In the Eurozone, there was increased manufacturing activity, with the PMI up from 46.1 to 47.5, even as the region remains in contraction overall. There was progress in new orders and output (though still negative), while employment continues to lag behind. The Chinese data, on the other hand, show continuing improvements, with the PMI up from 51.9 to 52.2. This is the highest PMI figure since March 2011, and it was pushed higher by stronger data across-the-board. This includes gains in new orders (including exports), employment, and output.
The news of progress in worldwide markets should provide some comfort to U.S. manufacturers as they seek to increase exports in the coming months. This was an area of weakness throughout much of 2012, particularly in the second half of the year.
Chad Moutray is chief economist, National Association of Manufacturers.
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