FR: PMI Composite FLASH

Mon Nov 23 02:00:00 CST 2015

Consensus Actual Previous
Manufacturing - Level 50.6 50.8 50.7
Services - Level 52.4 51.3 52.3
Composite - Level 51.3 52.3

Private sector economic activity looks to have lost a little steam in November. At 51.3, the flash composite output index was more than a full point short of its final October reading and at a 3-month low.

The headline deterioration reflected renewed weakness in services where the flash PMI fell 1.4 points to (also) a surprisingly soft 51.3 amidst indications that the Paris terrorist attacks may have had some negative impact. At 50.8, its manufacturing counterpart was up a couple of ticks from its final October level but still close enough to 50 to signal little better than stagnation.

Still, aggregate new business expanded for a third straight month with both sectors registering fresh gains. Moreover, manufacturing would have performed better but for the first fall in export demand in three months. Backlogs were also up again as relative strength in services more than offset a marginal decline in goods producing industries. Even so, overall employment contracted for a third time in as many months, albeit only slightly, and business optimism amongst service providers held close to October's historically subdued level.

Inflation developments were again disappointingly negative. Hence, while input costs increased for a tenth successive month (wholly due to services) output prices continued to decline in both sectors.

Following provisionally estimated quarterly GDP growth of just 0.3 percent in the period ending to September, the early signs are that the economy did little better in the fourth quarter. November seems to have been a poor month with the Paris attacks hitting the service sector in particular. However, with new orders and backlogs on an uptrend, December should be rather stronger. That said, additional monetary accommodation from the ECB next month would be more than a little welcome.

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.