Why do US stock investors pay such close attention to the M-PMI? At the beginning of each month, it provides one of the early reads on economic activity during the previous month. It also tends to be a good leading indicator of the y/y growth rate of S&P 500 revenue. The nonmanufacturing PMI tends to be a more coincident indicator of revenue growth. November’s M-PMI jumped to 57.3, the best reading since April 2011. It is up from the year’s low of 49 during May 2013. It suggests that revenue could be growing around 10% within the next 3-6 months, up from under 5% currently.
Before we get too excited, let’s check whether the Fed’s regional business surveys confirm the national M-PMI. The average of the regional composite manufacturing indexes (for New York, Philadelphia, Richmond, Kansas City, and Dallas) is highly correlated with the M-PMI. They rebounded together earlier this year, but the regional average has been relatively flat for the past three months, though at a solidly expansionary level. The same can be said for the average of the regional orders indexes and the M-PMI’s new orders component, which rose to 63.6 last month. The regional employment index actually edged down, while the national index edged up during November.
Today's Morning Briefing: Manufacturing Boom? (1) Amazon vs UPS. (2) Drone delivery. (3) The New Industrial Revolution. (4) GE fixes an engine problem by changing software code. (5) Global boom in M-PMIs. (6) PMI diffusion indexes showing more strength than actual manufacturing data. (7) Three possible explanations. (8) Regional business surveys also strong on balance. (9) UK, US, and Japan leading the pack with Eurozone and EMs trailing. (10) Focus on overweight-rated S&P 500 Industrials. (More for subscribers.)
Before we get too excited, let’s check whether the Fed’s regional business surveys confirm the national M-PMI. The average of the regional composite manufacturing indexes (for New York, Philadelphia, Richmond, Kansas City, and Dallas) is highly correlated with the M-PMI. They rebounded together earlier this year, but the regional average has been relatively flat for the past three months, though at a solidly expansionary level. The same can be said for the average of the regional orders indexes and the M-PMI’s new orders component, which rose to 63.6 last month. The regional employment index actually edged down, while the national index edged up during November.
Today's Morning Briefing: Manufacturing Boom? (1) Amazon vs UPS. (2) Drone delivery. (3) The New Industrial Revolution. (4) GE fixes an engine problem by changing software code. (5) Global boom in M-PMIs. (6) PMI diffusion indexes showing more strength than actual manufacturing data. (7) Three possible explanations. (8) Regional business surveys also strong on balance. (9) UK, US, and Japan leading the pack with Eurozone and EMs trailing. (10) Focus on overweight-rated S&P 500 Industrials. (More for subscribers.)
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