Investor Fear Eases Slightly; US Manufacturing PMI Tops Estimates Cal-Maine Foods NASDAQ:CALM, McCormick & Co NYSE:MKC

“Imports contracted for the 11th consecutive month, at a slightly slower rate in September. Reduced imports remain consistent with slowing demand. Shipping capacity and prices remain accommodative, but there are some indications of pricing pressure on container costs,” says Fiore. New Export Orders†ISM®’s New Export Orders Index registered 47.4 percent in September, 0.9 percentage point higher than the August reading of 46.5 percent. Customers’ Inventories†ISM®’s Customers’ Inventories Index registered 47.1 percent in September, down 1.6 percentage points compared to the 48.7 reported in August. “Customers’ inventory levels continue to indicate an appropriate tension, as panelists report their companies’ customers have less of their products in inventory, a positive for future production,” says Fiore. TEMPE, Ariz., Oct. 2, 2023 /PRNewswire/ — Economic activity in the manufacturing sector contracted in September for the 11th consecutive month following a 28-month period of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

  • Composite PMI is available on the official website of the Institute for Supply Management (ISM), which also provides a comprehensive analysis of the same.
  • “The index remains in strong contraction, reversing a three-month period of slowing contraction as production rates and new order levels attempt to reach a balance,” says Fiore.
  • Let us take the case of an automobile manufacturer, where the production decisions are based on the new orders it expects from the customers in future months.
  • Survey responses reflect the change, if any, in the current month compared to the previous month.

As GDP data are generally produced quarterly rather than at the
PMI’s monthly frequency, the PMI provides an advance guide to each
quarter’s GDP number, in most cases being used to anticipate the
quarterly or annual rate of change in GDP. These indexes therefore vary between 0 and 100 with levels of 50.0 signaling no change on the previous month. The Services PMI uk reits showed continued economic growth with a reading of 50.3% in May 2023. The ISM indicated that this was the fifth consecutive month of growth in this area. PMI information about supply and demand affects the prices that suppliers can charge. So if the manufacturer’s new orders are growing, it may raise customer prices and accept price increases from its suppliers.

Survey responses reflect the change, if any, in the current month compared to the previous month. The diffusion index includes the percent of positive responses plus one-half of those responding the same (considered positive). PMIs use a monthly questionnaire survey of selected companies which provide an advance indication of the performance of the private sector.

The PMI survey output index tracks monthly changes in
manufacturing production and service sector output, with a
composite index reflecting a GDP-weighted average of the two
sectors. These responses are raw data, never revised, and not seasonally adjusted since there is no significant seasonal pattern. The ISM Report on Business is compiled monthly by ISM’s Business Survey Committee into an easily understandable, straightforward report. The resulting single index number is then seasonally adjusted to allow for the effects of repetitive intrayear variations resulting primarily from normal differences in weather conditions, various institutional arrangements, and differences attributable to nonmoveable holidays. Department of Commerce and are subject annually to relatively minor changes when conditions warrant them.

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Originally focused on manufacturing, the PMI has been expanded to cover both manufacturing and services sectors. This expansion allows for a broader understanding of economic trends and activities across various industries. The PMI relies on survey responses from purchasing managers, and their interpretations of business conditions might be subjective.

A Manufacturing PMI® reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. A Manufacturing PMI® above 48.7 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 48.7 percent, it is generally declining. The distance from 50 percent or 48.7 percent is indicative of the extent of the expansion or decline. With some of the indicators within this report, ISM® has indicated the departure point between expansion and decline of comparable government series, as determined by regression analysis.

Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. Y can be either the annual or quarterly GDP growth rate, but in
most cases the PMI will act with a lead over the annual rate of one
to two quarters, so an appropriate lead/lag needs to be tested for
best fit.

  • A company also uses the Composite PMI to plan its annual budget, supervise staffing levels, and manage cash flow.
  • The survey covers 18 industries that include every aspect of the manufacturing sector.
  • The PMI is produced globally by S&P Global although a small number of trade associations also produce local PMIs in certain markets, such as the ISM in the United States.
  • The sub-indexes for production and new orders came in at 52.7 and 50.5 in September, respectively, up from 51.9 and 50.2 in August.

We can say that the PMI data did not have a major impact on the currency where the market remains sideways a few minutes after the news release as well. The composite PMI is closely watched by traders and investors around the world that greatly influences their investment decision. They mainly if the number is below or above the 50 levels, which shows potential contraction or expansion in the economy.

Composite PMI is available on the official website of the Institute for Supply Management (ISM), which also provides a comprehensive analysis of the same. The data can also be found on some open-source economic websites and financial magazines. Last month they raised their key interest rate for a 10th consecutive time but are likely now done and will stay on hold until at least July next year, according to economists in a Reuters poll. HCOB’s final euro zone manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, dipped to 43.4 in September from August’s 43.5, matching a preliminary estimate. On the one hand, economic growth seems sufficiently strong to allow the Federal Reserve, European Central Bank, and the Bank of… “Of the six biggest manufacturing industries, two — Food, Beverage & Tobacco Products; and Petroleum & Coal Products — registered growth in September.

The Manufacturing ISM® Report On Business® survey is sent out to Manufacturing Business Survey Committee respondents the first part of each month. Respondents are asked to report on information for the current month for U.S. operations only. ISM® receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses to give the most accurate picture of current business activity. ISM® then compiles the report for release on the first business day of the following month.

S&P Global United States Composite Purchasing Managers Index (PMI)

We will be looking at the PMI data in the Eurozone that was released in June (May as the reference month). The below image shows the previous, predicted, and latest PMI reading, where we see a big increase in the number compared to the previous month. China’s official purchasing managers index for the manufacturing sector returned to the expansion territory at 50.2 in September, increasing for the fourth contrary opinion consecutive month and pointing to an uptick in economic momentum, the National Bureau of Statistics said on Saturday. For each variable, the index is the sum of the percentage of ‘higher’ responses and half the percentage of ‘no change’ responses. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease.

Consumer Products & Retail

The PMI expresses economic conditions in the industry surveyed and the monthly “flash” report can be viewed as an advanced indicator of said conditions. All ISM indexes are diffusion indexes, which measure the extent to which a change is dispersed or diffused in a group. For each of the 10 business activities, survey respondents are asked to indicate whether it has become better, worse, or has stayed the same, as compared to the previous month.

Understanding Flash Manufacturing PMI

After the news announcement, volatility expands to the upside, and the market moves higher. As the PMI data was extremely positive for the economy, traders bought the currency and took the price higher. The PMI data had a positive impact on the currency pair, and the market makes new ‘high.’ One has to be cautious here by not jumping into the market for a ‘buy’ as it is against risk management rules. Let us start with the EUR/USD currency pair to observe the change in volatility due to the news release. The above image shows the price’s behavior before the news announcement, where we see that the market is a strong uptrend. We will be looking to buy the currency pair after a price retracement to a support or demand level.

Interpretation of the PMI

A reading under 50 represents contraction, and a reading at 50 indicates an equal balance between manufacturers reporting advances and declines in their business. Purchasing Managers’ Index™ (PMI™) data are compiled by S&P Global for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.

PMI™ Data – FAQ

Sometimes these surveys are branded in sponsor’s names, but importantly the data are collected and survey results compiled by S&P Global to ensure the same consistent survey standards are applied globally. Only S&P Global national PMI data are used in updates of broader geographical PMI series such as the global PMI and eurozone PMI. A significant deviation of a real value from a forecast one may cause a short-term strengthening or weakening of a national currency in the Forex market. The threshold values ​​of the indicators signaling the approach of the critical state of the national (local) economy occupy a special place. The above charts are that of the EUR/AUD currency pair, where the market shows a strong downtrend signifying a great amount of weakness in the Euro. Recently, the price has shown signs of retracement, and so we can expect a continuation of the down move after noticing trend continuation patterns.

On the other hand, when new orders decline, the manufacturer may have to lower its prices and demand a lower cost for the parts it purchases. A parts supplier for a manufacturer follows the PMI to estimate the amount of future demand for its products. The supplier also wants to know how much inventory its customers have on hand, which also affects the amount of production its clients must generate. Most sectors on the S&P 500 closed on a negative note, with utilities, real estate and energy stocks recording the biggest losses on Monday. However, information technology and communication services stocks bucked the overall market trend, closing the session higher.

New OrdersISM®’s New Orders Index contracted for the 13th consecutive month in September, registering 49.2 percent, an increase of 2.4 percentage points compared to August’s reading of 46.8 percent. The index reached its highest level success day trading since August 2022, when it registered 50.4 percent. A New Orders Index above 52.7 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).






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