EMU: PMI Composite


Tue Jan 06 03:00:00 CST 2015

Consensus Actual Previous
Composite - Level 51.7 51.4 51.1
Services - Level 51.9 51.6 51.1

Highlights
At 51.4, down 0.3 points versus its flash estimate, the final composite output index for December signalled a sluggish year-end for the Eurozone economy. The flash service sector PMI was also revised down 0.3 points to 51.6 and so now stands just 0.5 points above its final November reading.

New orders accelerated versus mid-quarter but growth was only muted and overall activity had to be supported by a further decline in backlogs. Employment was up for a second consecutive month but only slightly and performances across the member states were very mixed.

Ahead of the first ECB meeting of the year, inflation developments will underpin speculation about the adoption of QE. Hence, cost inflation declined to a 58-month low while service provider charges fell for the thirty-seventh time in as many months. Business expectations remained muted.

Regionally, the best performer in terms of all-sector output growth was Ireland (61.0) ahead of Spain (54.3) and Germany (52.0). However, both France (49.7) and Italy (49.4) saw a renewed contraction in overall activity.

For the Eurozone as a whole, the final fourth quarter average composite output index stands at 51.5, its weakest reading since the third quarter of 2013 and indicative of what should be at most only a minimal increase in real GDP over the period. Inflationary pressures are still waning and a sub-zero HICP rate is probable as soon as tomorrow's flash December report. Against this backdrop, speculators have all that they require to anticipate the ECB finally accepting the need to provide a much more aggressive monetary stimulus very soon.

Definition
The Eurozone Composite PMI is produced by Markit and is based on original survey data collected from a representative panel of around 5,000 manufacturing and services firms. National manufacturing data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. National services data are included for Germany, France, Italy, Spain and the Republic of Ireland.

The Eurozone Services PMI (Purchasing Managers' Index) is produced by Markit and is based on original survey data collected from a representative panel of around 2,000 private service sector firms. National data are included for Germany, France, Italy, Spain and the Republic of Ireland. These countries together account for an estimated 80% of Eurozone private sector services output.


Description
Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.