Markit Manufacturing PMI: 'Strongest Manufacturing Growth For 3 Years'

European Open Preview: Equities soften as China retaliates; US ISM manufacturing PMI pending

European Open Preview: Equities soften as China retaliates; US ISM manufacturing PMI pending

The Nikkei India Manufacturing Purchasing Managers Index (PMI) declined to a five-month low of 51 in March from 52.1 in February.

Amid reports of spare operating capacity, firms reduced their payroll numbers for the first time in eight months, albeit at a fractional pace. Growth in new export business (which is not a component of the headline PMI) slipped to a 15-month low, says HIS Markit. However, raw material shortages across the supply chain made the average vendor performance deteriorate in March (but at a modest rate overall).

Meanwhile, new orders continued to decline in March as firms continued to decrease their purchasing activity and pre-production inventories, reflecting poor demand conditions.

On the price front, inflationary pressures moderated in March, with softer increases in both input costs and output prices recorded. The overall pace of growth nevertheless remains robust by historical standards, with decent PMI readings seen in all countries, including Greece, to indicate a steady, broad-based expansion.

"We wouldn't read too much into this month's data given the weather distortions and would expect a marked improvement when the April Manufacturing PMI report is released", Investec Ireland chief economist Philip O'Sullivan said.

Other nations to post strong growth were Austria (58.0), Greece (55.0) and Ireland (54.1), 10-month, 3-month and 12-month lows respectively. So it doesn't look "encouraging" in terms of our manufacturing momentum to give people a gauge of our industrial activity.

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Although the PMI is positive, it's the lowest in a year; in the last quarter of 2017 the PMI surged by 1,3%. A reading above 50 shows growth in the sector.

"Overall, I don't expect the manufacturing sector to slow significantly for this year, but it will continue to grow at the slower pace as we have to watch out for the potential headwinds to our manufacturing sector growth coming from [the] potential trade war between the United States and China".

As such, there's been optimism about the year ahead, though the ongoing tariff battles-largely between the USA and China over steel and intellectual property rights-have contributed to inventory stockpiles.

Manufacturing output growth had remained steadily above 1% towards the end of a year ago but may have fallen to about 0.5%, according to economists.

A separate but similar survey from IHS Markit indicated manufacturing growth was at its highest level in three years. Slower demand is explained by a drop in domestic demand, as inflation outpaces income growth eating into disposable income.

Sterling gained on Tuesday as the dollar sold off and traders awaited United Kingdom manufacturing survey data for clues as to whether the British economy is building momentum to fuel expectations of an interest rate rise next month.

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