FR: PMI Manufacturing Index

Mon Mar 02 02:50:00 CST 2015

Consensus Actual Previous
Level 47.7 47.6 49.2

The contraction in French manufacturing was marginally shaper than originally thought last month. The final PMI for February weighed in at 47.6, a tick down versus its flash estimate, and 1.6 points short of its final January mark.

Steeper falls were recorded in output, new orders, employment and stocks of purchases. Indeed, the headline index would have been lower still but for a larger increase in suppliers' delivery times.

Output fell for a ninth consecutive month and new orders declined more quickly than at any time since last August with exports off for a tenth successive period. Backlogs were also lower again and without this production would have contracted even more markedly. The drop in employment was also more prevalent than at the start of the year but still relatively modest.

Inflation news was soft across the board. Input costs were dragged down by weakness in oil and general raw materials and saw their steepest decline since July 2012. At the same time, factory gate prices decreased for a twelfth straight month and at the fastest pace since last October.

Today's figures would seem to confirm a generally weak French manufacturing sector in mid-quarter. However, the results here are significantly more negative than the new INSEE survey released just last week which suggested that conditions in the sector were close to their long-run average. Time will tell which is the more accurate.

The Purchasing Managers' Manufacturing Index (PMI) is based on monthly questionnaire surveys of selected companies which provide an advance indication of what is really happening in the private sector economy by tracking changes in variables such as output, new orders, stock levels, employment and prices across the manufacturing sectors.

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 ISM manufacturing index in the U.S. and the Markit PMIs elsewhere, 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..

The Markit PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.