What is Flash Manufacturing PMI ?

The Flash Manufacturing PMI is a preliminary estimate of the Purchasing Managers’ Index (PMI) for the U.S. manufacturing sector, based on a survey of purchasing managers from around 800 manufacturers.

The Flash Manufacturing PMI can affect the forex market by influencing the demand and supply of the U.S. dollar, which is the world’s reserve currency and the most traded currency in the forex market. A higher than expected PMI reading can signal a stronger U.S. economy and boost the demand for the dollar, while a lower than expected PMI reading can signal a weaker U.S. economy and reduce the demand for the dollar. The dollar’s exchange rate can also affect the prices of commodities, such as gold, that are denominated in dollars.

The Flash Manufacturing PMI can also affect the gold market by influencing the market sentiment and the inflation expectations. Gold is often seen as a safe-haven asset that investors turn to in times of uncertainty or risk aversion. A lower than expected PMI reading can increase the demand for gold as a hedge against economic or political instability, while a higher than expected PMI reading can decrease the demand for gold as investors seek higher returns in other assets. Gold is also considered a hedge against inflation, as it tends to retain its value over time. A higher than expected PMI reading can increase the inflation expectations and the demand for gold as a store of value, while a lower than expected PMI reading can decrease the inflation expectations and the demand for gold.

According to the latest data from S&P Global, the Flash Manufacturing PMI for the U.S. was 50.0 in October 2023, indicating a stabilization in the manufacturing sector after six months of contraction. This was slightly higher than the forecast of 49.5 and the previous month’s reading of 49.812.

The PMI is a weighted average of five indicators: new orders, output, employment, suppliers’ delivery times, and stocks of purchases. A reading above 50 indicates an overall increase in the sector, while a reading below 50 indicates an overall decrease.

The Flash Manufacturing PMI for October 2023 was 50.0, up from 49.8 in September, signalling a stabilization in the health of the manufacturing sector2. This was the highest reading in six months and the first time the index reached the 50.0 mark since April 20233.

The improvement in October was driven by a renewed increase in new orders, which rose at the fastest pace since September 2022, and a slight acceleration in output growth, which was the second-fastest since May 20222. However, employment levels declined for the first time in 39 months, and backlogs of work shrank for the thirteenth consecutive month.

Input costs rose at the fastest rate since April, mainly due to higher oil and oil-derived material costs, while output charges increased at the most significant pace in six months2. Business confidence dipped to its lowest point in 2023 so far, largely due to diminishing backlogs and subdued demand conditions.

Author : ArmanShabanTrading Team (AST Team)

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