The contraction in French manufacturing activity slowed in March. At 48.8, the final PMI for the sector was up 0.6 points versus its flash reading and 1.2 points above its final February mark.
Output fell for a tenth successive month but at a reduced rate compared with mid-quarter and much the same applied to new orders where the latest decline extended the current sequence of falls to eleven months. Within total orders, exports saw their smallest drop since November 2014. Backlogs were also down less sharply than in the previous period and employment shrank at its weakest pace since April 2014.
Nonetheless, inflation news continued very subdued. Hence, input costs fell for a fourth straight month albeit at only a marginal pace, and factory gate prices were down for the thirteenth month in a row.
March ended a disappointing first quarter for French manufacturing. Although the latest PMI reading was close to stagnation levels, earlier performances suggest that the goods producing sector will have subtracted from first quarter real GDP growth. That said, actual industrial production was up a monthly 0.4 percent in January after a 1.4 percent bounce in December, so it may well be that the survey results prove somewhat misleadingly soft.
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.
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