FR: PMI Composite FLASH

Wed Dec 16 02:00:00 CST 2015

Consensus Actual Previous
Manufacturing - Level 50.4 51.6 50.8
Services - Level 50.7 50.0 51.3
Composite - Level 50.3 51.3

Private sector economic activity slowed in December according to the latest flash PMI report. At 50.3 the key composite output index was down 0.7 points versus its final November print, at a 4-month low and indicative of near-stagnation.

The headline deterioration reflected weaker services where the PMI was provisionally put at a lower than expected 50.0, or a full point short of its final mid-quarter outcome. This was the sector's worst performance in nearly a year. By contrast, the recovery in manufacturing gained a little ground with its flash PMI rising a point to a surprisingly firm 51.6, a 21-month high.

Aggregate new business expanded again but at only a marginal pace due to a marked slowdown in services and backlogs similarly grew sluggishly. However, employment at least stabilised after three months of decline and business expectations in services remained positive despite slipping to a 3-month low.

Input costs were up for an eleventh straight month but output prices fell further with a rate of decline essentially unchanged from that seen in November.

In sum the provisional December results are disappointing. Although it looks to have been a better month for manufacturing, the deceleration in service sector activity, only in part due to the Paris terrorist attacks, suggests that fourth quarter real GDP growth will be anaemic and unlikely to exceed the 0.3 percent quarterly rate registered in July-September. At the same time, deflation pressures remain significant.

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.