EMU: PMI Composite


Wed May 06 03:00:00 CDT 2015

Consensus Actual Previous
Composite - Level 53.5 53.9 54.0
Services - Level 53.7 54.1 54.2

Highlights
Eurozone growth was slightly stronger than originally thought last month. Largely due to an upward revision to the flash service sector PMI (now 54.1) the final composite output index was raised 0.4 points to 53.9, just a tick below its final March level.

A 0.4 point upward revision to the service sector PMI reflected stronger new order inflows which matched March's near 4-year high, combined with a further increase in backlogs. Headcount was up for a sixth straight month with a rate of increase above the average for this period. Business confidence for the year ahead fell slightly but remained among the strongest seen in the last four years. Input costs advanced again and the rate of inflation was close to March's 8-month high. Even so, service charges continued to fall, albeit at their weakest pace since June last year.

Regionally, the strongest performing state was Ireland (composite output index 59.7), ahead of Spain (59.1 and a 101-month high) and Germany (54.1). Italy (53.9) also saw a multi-month high but France (50.6) registered a 3-month low.

Today's survey should be consistent with Eurozone real GDP growth of around 0.4 percent at the start of the second quarter. If so, the signs would be that the economy is struggling to gain any momentum which, in itself, is not good news for ECB policymakers seeking to meet their near-2 percent inflation target. Still, orders are rising, confidence is high and employment finally seems to be on a steady uptrend. In sum, there is nothing here to suggest that the central bank will deviate from its current policy stance for some while.

Definition
The Eurozone Composite PMI is produced by Markit and is based on original survey data collected from a representative panel of around 5,000 manufacturing and services firms. National manufacturing data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. National services data are included for Germany, France, Italy, Spain and the Republic of Ireland.

The Eurozone Services PMI (Purchasing Managers' Index) is produced by Markit and is based on original survey data collected from a representative panel of around 2,000 private service sector firms. National data are included for Germany, France, Italy, Spain and the Republic of Ireland. These countries together account for an estimated 80% of Eurozone private sector services output.


Description
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.