French manufacturing contracted at a slightly faster pace than originally thought last month. The final PMI weighed in at 48.0, 0.4 points short of its flash estimate and 0.8 points below its March reading. The rate of decline was the fastest since December 2013.
As previously indicated, output shrank for an eleventh consecutive month and at its steepest rate so far in 2015. New orders were down for a twelfth straight month and backlogs fell at their sharpest pace since last August. Employment decreased for a thirteenth month in a row but, while the rate of job shedding quickened versus March, it remained only moderate.
A weaker euro was mainly responsible for the first increase in input costs in five months but factory gate prices still fell, extending the trend that began some fourteen months ago.
There is no good news in today's report which paints another bleak picture of French manufacturing. Not only is current output still on a solid downswing, but the weakness of orders points to further losses over the near term. Against this backdrop deflation risks will not go away in a hurry.
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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