FR: PMI Composite FLASH

Thu Apr 23 02:00:00 CDT 2015

Consensus Actual Previous
Manufacturing - Level 49.1 48.4 48.2
Services - Level 52.4 50.8 52.8
Composite - Level 50.2 51.7

French private sector business activity was disappointingly soft this month if the latest flash PMI survey is anything to go by. At 50.2 the preliminary reading on the key composite output index was 1.3 points below its March level, at a 3-month low and weak enough to suggest that the economy did little more than stagnate over the period.

The disappointing headline reflected in part another sub-50 manufacturing PMI (48.4 after March's final 48.8) but mainly a 1.6 point fall in the service sector PMI (50.8 after 52.4).

Particularly worryingly, aggregate new business growth slowed to its weakest rate in three months and, even more of a concern, manufacturers reported a faster pace of decline. Backlogs at least rose in services but in manufacturing, where the output sub-index slipped further to just 47.1, they fell at their sharpest rate since last August. As a result, an increase in overall employment was marginal and manufacturing continued to shed jobs. Somewhat surprisingly against this backdrop, business expectations for the year ahead climbed to their highest level in more than three years.

Inflation news was mixed. Hence, input costs were up for a third month in a row but output prices fell yet again and at much the same pace as in March.

Today's PMI findings are notably gloomier than the INSEE results released just a few minutes ago (see calendar entry). However, both reports clearly indicate a lack of any real momentum in the French economy. Real GDP would appear to be expanding but at such a modest rate that makes very little difference, especially to those still trying to find employment.

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.