FR: PMI Composite FLASH

Tue Mar 24 03:00:00 CDT 2015

Consensus Actual Previous
Manufacturing - Level 48.5 48.2 47.7
Services - Level 52.8 52.8 53.4
Composite - Level 51.7 52.2

French economic activity looks to have expanded for a second straight month in March. However, at 51.7, the flash PMI survey's composite output index was 0.5 points below its final mid-quarter outturn and close enough to the 50 growth threshold to suggest that an already relatively sluggish recovery has slowed.

Indeed, once again manufacturing contracted. The sector's flash PMI was 48.2, an improvement on February's final 47.6 reading but still the wrong side of 50. Accordingly, services were wholly responsible for the composite output measure holding in positive growth territory but even here the PMI dropped 0.6 points from last month to 52.8.

Aggregate new orders and backlogs rose as a pick-up in services more than offset another fall in manufacturing and manufacturing output (47.1) declined at much the same pace as in February. Total employment at least made ground for the first time in seventeen months but the gain was only fractional and, again, restricted to services. Business expectations in services remained positive but still dropped to their weakest level since December 2014.

Combined input prices were up for a second successive month but output prices decreased again in both sectors, albeit at their slowest rate in half a year.

Today's results make for rather disappointing reading and point to real GDP growth this quarter of only about 0.1 percent. This seems rather soft in the context of other more upbeat economic indicators of late and is comfortably short of the national central bank's current 0.3 percent call. Still, whatever the true rate, the ongoing divergence between manufacturing and services cannot be good news for the recovery's more medium-term sustainability.

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.