The Manufacturing Purchasers Managers’ Index (PMI) for the month of February indicates a decrease in optimism for the manufacturing and service sectors. A PMI produced by surveying the purchasing executives of about 300 companies. The objective of the PMI is to indicate the growth of the industry by gauging the activity of production managers in the market. The market indicator is based on a reading in which 50 indicates no change, below 50 indicates a loss for the month, and above 50 represents expansion compared to the previous month.
This month’s PMI stood at 54.3. That’s a drop from last month’s 55.
The expectation for February was that the PMI would follow the steady increase of the gauge that had continued since November. February’s PMI was predicted to rise to 55.3 but fell short of expectations.
Production rates grew slower this month than last month while new order growth and output showed a minimal increase. Domestic demand is critical towards showing improvement in the PMI analysis, and some investors may be starting to demonstrate concern about overall economic growth.
The PMI is important to not only investors but to the manufacturing industry’s decisions. Production decisions are made using this gauge, new order purchase decisions and the purchase of raw materials required for the process. Suppliers also invest in PMI analysis to set prices and predict demand for its products. The decrease of new orders indicated in this month’s
PMI may mean that manufacturers may have to lower prices and demand lower cost for parts purchasing.
All in all, this month’s PMI did demonstrate an increase in payroll figures, and the economy overall has shown a 2.5% increase. For now, there’s nothing to cause extreme worry and this month could be an indicator of preparation from manufacturers in the United States for the upcoming months. After the recent continual increase, there is a bit of blow back this month with the loss of momentum. We are still resting on an overall general increase in the PMI. However, it’s clear from these results that the industry is responding to the ever-changing climate of the market.
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