The latest Markit purchasing managers index (PMI) flash reading surprised economists on Friday. It showed an upturn, boosted by domestic demand, signaling monthly strength. The PMI manufacturing figure was at 54.0 for October, which is its best performance since May. This beat out the Bloomberg consensus estimate of 53.0 but was within the range of 51.5 to 54.3.
The previous reading in September was 53.1, with the initial flash figure just 0.1 below that.
In the report, new orders were seen at a seven-month high and described as strong. However, there was only a modest contribution from export orders. Production this month is also at a seven-month high. Hiring is up from September’s 27-month low.
Manufacturers within the Markit sample remain cautious about inventories, which have consecutively decreased for a third straight month. Input costs are down due to the strong dollar and falling raw material prices, especially for steel. Finished prices are steady at a 37-month low.
One thing worth mentioning is that this report does conflict with the regional manufacturing reports, which so far are pointing to another weak month for October. And this report typically runs hot compared not only to other reports but most importantly to government data which, unlike this report, have been in contraction for the past year. Watch for the Dallas and Richmond Fed reports early next week to see if strength in this report is confirmed.
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