French manufacturing performed much as originally reported in October. The final sector PMI weighed in at 50.6, just a tick below its flash reading and equalling its final September mark.
As previously indicated, output was up for a second consecutive month but at only a very modest rate and supported by a return to positive growth in new orders for the first time in one-and-a-half years. Within the latter gain, new export orders also expanded. However, backlogs fell marginally and employment continued to decline for a nineteenth straight month. Moreover, the rate of job shedding was the sharpest since December 2014.
Input costs decreased for a second month in a row and more quickly than in any month since February. Output prices similarly continued to spiral south.
Today's report offers little fresh news. French manufacturing continues to struggle and although October probably saw an increase in industrial production, the ongoing weakness of new business hardly bodes well for the quarter as a whole. For now, real GDP growth remains largely in the hands of the service sector.
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.
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