FR: PMI Composite FLASH

Wed Sep 23 02:00:00 CDT 2015

Consensus Actual Previous
Manufacturing - Level 48.3 50.4 48.6
Services - Level 51.0 51.2 51.8
Composite - Level 51.4 51.3

French economic activity gained a little momentum this month according to the latest flash PMI results. At 51.4, the key composite output index was up 1.2 points versus its final August reading, reflecting gains in both the manufacturing and service sectors. However, the headline data still suggest a significant degree of underperformance compared with most other EMU states.

At 50.4, the flash manufacturing PMI crept back above the 50 growth threshold to register a surprisingly firm 3-month high. However, although output (51.2) expanded, new orders fell despite steady export demand. Backlogs were higher but this was probably in part due to a further shakeout of employment. Input costs declined for the first time in six months and output prices continued to spiral south.

The services PMI (51.2) was up a modest 0.6 points from its final August mark, mainly courtesy of stronger new business inflows. Nonetheless, headcount was still cut and business expectations slipped to their lowest level in eleven months. Input costs were broadly stable but service provider charges still decreased under heavy competitive pressure.

Accordingly, today's survey results are quite mixed. On the positive side the economy appears to have picked up a little steam this month. However, with orders falling, confidence on the wane and margins under intense pressure near-term prospects remain poor. The third quarter will likely see a return to positive real GDP growth but any recovery should be disappointingly sluggish and leave intact a worryingly soft outlook for prices.

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.