FR: PMI Composite FLASH

Fri Oct 23 02:00:00 CDT 2015

Consensus Actual Previous
Manufacturing - Level 50.1 50.7 50.4
Services - Level 51.7 52.3 51.2
Composite - Level 52.3 51.4

French economic activity expanded further in October and slightly faster than in September according to the provisional PMI results. At 52.3, the key flash composite output index was 0.4 points above its final end of quarter mark and at a 4-month high.

The overall improvement came largely courtesy of a stronger services sector for which the flash PMI similarly climbed 0.4 points versus its final September mark to also 52.3. This was somewhat higher than expected. By comparison, manufacturing had a more subdued period with its preliminary PMI weighing in at 50.7, stronger than the market consensus but only a tick firmer than in the previous month and close enough to the 50 growth threshold to signal not much better than stagnation.

Aggregate new business rose for a second successive month but while manufacturers saw their first increase in eighteen months, the total gain was still quite modest. Much the same applied to backlogs which would have declined but for another advance in services. Indeed employment was down again for a second straight month with manufacturing seeing another sizeable shakeout. More optimistically, manufacturing output (52.4) recorded its best performance in nineteen months while in services, business expectations improved again, albeit remaining below their long-run average.

Private sector input costs were up for a ninth month running as a rise in services more than offset a decline in manufacturing but aggregate output prices fell yet again, notably in services.

The flash PMI results indicate continued growth in the French economy at the start of the new quarter. However, the expansion remains only sluggish and new business is rising too slowly to be confident about any real acceleration through year-end. With employment and output prices still falling, some extra help from the ECB would certainly not go amiss.

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.