Chart of the Day: Here’s why the PMI outcome is even worse than we think

Manufacturers are now destocking.

Most recent PMI numbers have put a dent on 1Q15 GDP.

According to a report by DBS, headline manufacturing PMI for March came in at 49.6, down just a tad from 49.7 in the previous month. New export orders, inventories and stocks of finished goods indexes were down, suggesting that manufacturers are destocking in anticipation of weak demand ahead. Nonetheless, perhaps some can take comfort that the PMI is still more or less unchanged from the previous month figure.

However, the crux of the issue is that the PMI is not seasonally adjusted. If seasonal effect is accounted for, the actual outcome is even worse. Overall manufacturing PMI will read a dreary 49.2 after seasonal adjustment, instead of 49.6 in the month. And this will certainly put a huge dent on the 1Q15 GDP figures due this Friday. Indeed, with four consecutive months of below 50 readings in the PMI and an equally dismal industrial production output growth of -1.2% YoY on average between Jan-Feb, expectation for GDP growth will surely be pared down.

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