U.S. Markets closed

Manufacturing PMI, existing home sales: What to expect in markets Friday

Market participants are about to get a read on the pulse of a sector at the heart of economic slowdown concerns.

Research firm IHS Markit releases its preliminary print of the U.S. manufacturing purchasing managers’ index for March on Friday, with consensus economists expecting PMI to register at 53.5 for the month. This would mark a slight improvement from February’s reading of 53, which had been the lowest since August 2017 as expansion in output and new orders each slowed.

IHS Markit’s report comes as other indicators domestically and abroad have pointed to softening in goods-producing industries. These, in turn, have fueled concerns for a broad global slowdown.

For instance, the Federal Reserve’s latest Beige Book – an anecdotal collection capturing economic conditions across the regional Feds’ 12 districts – pointed out in late February that “numerous manufacturing contacts conveyed concern about weakening global demand, higher costs due to tariffs and ongoing trade policy uncertainty.”

Manufacturing comprises only about 12% of GDP domestically. But softening in domestic production adds to a constellation of countries that have reported weakness in this sector in recent readings. Germany’s manufacturing PMI shrank to a six-year low last month, while China’s manufacturing sector contracted for a third consecutive month in February.

Some analysts believe there may be a recovery on the horizon, however.

“U.S. manufacturing indicators are unlikely to continue weakening at the pace seen over the past few months. China’s industrial downturn will hit bottom soon, given the substantial policy stimulus now in place. Domestic demand in the U.S. appears to have softened too, in the wake of the plunge in stock prices in Q4,” Ian Shepherdson of Pantheon Macroeconomics wrote in a note. “By the early summer we expect the manufacturing outlook to be brightening.”

Economists also expect to see more of a convergence between expansion in the manufacturing and services sectors for the month. In February, the services PMI registered at 56, the highest level in eight months, contrasting sharply with the manufacturing sector’s disappointing results. Consensus economists expect IHS Markit to report that services PMI eased to 55.5 in March.

Existing home sales

Investors are also hoping to see a rebound in existing home sales after three straight months of declines.

Consensus economists expect the National Association of Realtors to report that sales of previously owned homes grew 3.2% month-over-month in February, to a seasonally adjusted annual rate of 5.1 million. This would snap a three-month losing streak for existing home sales, which fell 1.2% month-over-month in January and 6.4% in December to the lowest level since 2015.

“Existing home sales peaked last February, and the news since then has been almost unremittingly gloomy,” Shepherdson wrote in a note, pointing out that sales fell at a 14.4% annualized rate in the three months to January. “Sales won’t fall forever, but the lack of precedent means that we have no way of knowing where supply and demand will come back in balance.”

That said, a 4.6% jump in January pending home sales “suggests that the floor might now have been reached,” Shepherdson added. A recent decline in mortgage rates – spurred in part by the Federal Reserve’s recent decision to hold key interest rates steady – also bodes well for potential future home-buyers.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, andreddit.

Read more from Emily:

S&P 500, Nasdaq close at highest level in 5 months

Boeing 737 Max groundings ‘pressure’ U.S. economic data: Wells Fargo

Beer sales are lukewarm and pot could be part of the problem

Recession risks remain muted as fear tracks higher: Report