EMU: PMI Composite FLASH

Tue Jun 23 03:00:00 CDT 2015

Consensus Actual Previous
Composite - Level 53.6 54.1 53.4
Manufacturing - Level 52.4 52.5 52.3
Services - Level 53.8 54.4 53.3

The Eurozone private sector economy enjoyed a relatively buoyant June with provisional results for both manufacturing and services exceeding expectations.

The key composite output index weighed in at 54.1, up 0.5 points from its final May level and at a 49-month high. The improvement here came courtesy of a 0.6 point rise in the flash services PMI to 54.4 (also a 49-month high) and a more modest 0.3 point increase in its flash manufacturing counterpart to 52.5 (a 14-month peak).

Manufacturing output (53.5 after 53.3) accelerated modestly but broad-based gains in new orders and employment still fell short of the rises seen in May. Moreover, while backlogs were up for the fourth time in five months, business expectations in services declined to a 6-month low, in large part it seems due to concerns about developments in Greece.

Average input cost inflation slowed despite another rise in charges on the month and, more importantly, output prices continued to decline, albeit at one of the weakest rates recorded in the last three years.

Regionally there were positive results out of both core countries with the composite output index provisionally rising to 54.0 in Germany and to a 4-year high of 53.4 in France. Elsewhere in the Eurozone, economic activity decelerated for a second straight month but growth at least remained above the core.

Today's findings mean that the second quarter Eurozone composite output index provisionally saw its highest level in four years. This should be reflected in economic growth close to the quarterly 0.4 percent rate posted in January-March. The Greek crisis does not appear to have had a marked impact on the rest of the region's output so far but it has clearly dented business sentiment and prospects for the third quarter could be hit hard should a default take place. In any event, inflation trends are still far too soft to put much of a smile on the ECB's face.

The Eurozone PMI is produced by Markit and is based on original survey data collected from a representative panel of around 5,000 companies based in the euro area manufacturing and service sectors. 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 flash estimate is typically based on approximately 85 percent to 90 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.