FR: PMI Composite FLASH

Thu May 21 02:00:00 CDT 2015

Consensus Actual Previous
Manufacturing - Level 48.5 49.3 48.4
Services - Level 51.9 51.6 50.8
Composite - Level 51.0 50.2

Economic activity grew at much the same sluggish pace in May as it did in April according to the latest flash PMI survey. At 51.0, the composite output index was just 0.4 points above its final reading at the start of the quarter and, more significantly, only one point higher than the 50 growth threshold.

The expansion was again restricted to services where the flash PMI weighed in at 51.6 or 0.2 points firmer than its final April print. By contrast, at 49.3 its manufacturing counterpart signalled another contraction, albeit at its slowest pace in a year. Combined the results were broadly in line with market expectations.

New business expanded at a solid rate in services but continued to decline in manufacturing and a similar pattern was apparent in both backlogs and employment. Business expectations in services hit a 38-month high.

Meantime, aggregate input costs were up for a fourth successive month and at the sharpest pace since January 2014. However, combined output prices remained on their downward path reflecting fresh falls in both sectors.

Overall today's results contain few surprises and point to sluggish and unbalanced growth in mid-quarter. That said, the PMIs were overly pessimistic about the economy last quarter so GDP could yet surprise on the upside in the current period. However, in any event, deflation pressures are still a real concern.

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.