FR: PMI Composite FLASH

Fri Jul 24 02:00:00 CDT 2015

Consensus Actual Previous
Manufacturing - Level 50.7 49.6 50.5
Services - Level 53.8 52.0 54.1
Composite - Level 51.5 53.4

Private sector business activity was surprisingly soft in July. With both the flash manufacturing and service sector PMIs undershooting expectations, the key composite output index was provisionally put at 51.5, crucially above the 50 growth threshold but down almost 2 points from its final June print and a 3-month low.

Indeed, at just 49.6, the flash manufacturing PMI fell more than 2 points to slide back below the 50 mark. Its services counterpart weighed in at 52.0, down from a final 54.1 quarter-end reading and also a 3-month trough.

Overall new orders were up for an eighth successive month but at a slower pace than in June and within this manufacturing recorded a decline. Backlogs rose in both sectors, most notably in services, but aggregate employment dipped for the first time in five months reflecting falls in both categories. Services also saw their lowest level of business expectations so far this year although at least they stayed positive.

Input costs increased for a sixth straight month but remained historically soft. More importantly, output prices fell yet again, albeit by the smallest amount in eleven months.

Today's flash PMI results are clearly weaker than the INSEE business climate survey findings released earlier this week. However, both sets of data suggest that the French economic recovery is struggling to gain any real momentum which, with output prices still falling, means deflation risks cannot be ignored.

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.