FR: PMI Manufacturing Index

Thu Oct 01 02:50:00 CDT 2015

Consensus Actual Previous
Level 50.4 50.6 48.3

French manufacturing activity was a little stronger than originally thought last month. The flash sector PMI was revised up a couple of ticks to 50.6, a 2.3 point gain versus August's final print and indicative of a very modest improvement in overall activity rates.

Promisingly, output saw its first rise in three months, and, moreover, registered its fastest growth rate in a year-an-a-half. Even so, total new orders still posted a minor decline despite a steady performance by exports. Backlogs managed a minimal increase but headcount decreased, albeit only fractionally.

Input prices were down for the first time in six months and more sharply than at any time since February. More significantly, factory gate prices continued to spiral south. The latest drop here was the nineteenth in as many months and the steepest since May.

The minor revision to the headline index still leaves a generally soft impression of French manufacturing. However, a return to positive output growth and somewhat better news on new orders suggests that the outlook for the sector may be beginning to improve. Nonetheless, manufacturing is unlikely to make much of a contribution to fourth quarter real GDP growth.

The Purchasing Managers' Manufacturing Index (PMI) is based on monthly questionnaire surveys of selected companies which provide an advance indication of what is really happening in the private sector economy by tracking changes in variables such as output, new orders, stock levels, employment and prices across the manufacturing sectors.

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 ISM manufacturing index in the U.S. and the Markit PMIs elsewhere, 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..

The Markit PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.