FR: PMI Composite FLASH

Fri Feb 20 02:00:00 CST 2015

Consensus Actual Previous
Manufacturing - Level 49.6 47.7 49.5
Services - Level 50.0 53.4 49.5
Composite - Level 52.2 49.5

Private sector business activity picked up some steam this month according to the new flash PMI survey. At a provisional 52.2, the key composite output index was nearly 3 points higher than its final January reading and at its strongest level in some forty-two months.

However, the headline rise masked a very lopsided performance amongst the major sectors. Hence, while the flash services PMI jumped to 53.4, up fully 4 points versus its final January outturn, the manufacturing index dropped 1.5 points to a lowly 47.7.

New business rose in services but manufacturers saw their steepest decline since last August with exports suffering their worst month in the last twenty. Manufacturing output (sub-index 47.0) contracted at a faster pace than in January and increasing backlogs were, again, wholly attributable to strength outside of the good producing sector. Overall employment was stable despite a decline in manufacturing and business optimism in services hit a 35-month high, albeit remaining below its long-run average.

Manufacturing costs fell on the back of weaker energy charges while services posted a modest increase. However, both sectors saw yet another decline in output prices and, combined, the fall was the sharpest since October 2009.

At 50.8, the average first quarter composite output index so far suggests economic growth is unlikely to match the 0.4 percent rate recently predicted by the national central bank. However, the PMI surveys also pointed to a contraction in total output in October-December when real GDP provisionally expanded 0.1 percent. As such, today's report may well be consistent with at least a modest pick-up in economic momentum. Even so, the recovery is still sluggish, worryingly uneven and clearly not strong enough to counter accumulating deflationary pressures.

The PMI is produced by Markit Economics and is based on original survey data collected from a representative panel of 750 companies based in the French manufacturing and service sectors. The flash estimate is based on around 85 percent of total PMI survey responses each month and is designed to provide an accurate advance indication of the final PMI data.

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.