US Manufacturing PMI
The US manufacturing PMI (purchasing managers’ index) stood at 50.5 in May—compared to 50.8 in April. It’s below the Market expectation of 51, according to data provided by Markit Economics. When the index level is above 50, it indicates an expansion. An index level below 50 indicates a contraction. The index is at 50.5 in May. It shows that the manufacturing PMI recovered at a slower rate than in April. This is the first time that production fell since September 2009.
What does it indicate for the economy?
New orders improved at a slower rate in 1Q16. Slower growth in business inventories signaled that the US (QQQ) (VOO) (SPXL) manufacturing sector is experiencing slower output. Weaker client demand and a weaker global (ACWI) (VEU) outlook are mainly responsible for the slowdown in the manufacturing PMI.
Manufacturing firms started to adopt cautious inventory policies to overcome uncertainties in the business outlook. However, we can expect a rebound in economic growth in 2Q16 because some indicators showed improved figures in April.
In the next part, we’ll analyze the US Services PMI in May.