EMU: PMI Composite


Tue Apr 05 03:00:00 CDT 2016

Consensus Actual Previous
Composite - Level 53.7 53.1 53.0
Services - Level 54.0 53.1 53.3

Highlights
Eurozone private sector activity expanded at a slower rate than thought last month. At 53.1, the final composite output index was 0.6 points short of its flash estimate and just a tick above its final reading in February.

The downward revision was due to a less robust performance by services for which the final PMI stood at 53.1, nearly a full point short of its flash outturn and 0.2 points below its final print in mid-quarter. Worryingly, growth of output and new orders both slowed to 14-month lows which in turn prompted the smallest rise in the sector's headcount since September 2015. Input costs rose for a seventy-sixth successive month with increases recorded in every nation covered by the survey. However, the rate of cost inflation remained below its long-run average and, more importantly, service sector charges declined for the sixth month in a row.

In terms of composite output the best performer was Ireland (60.7) ahead of Spain (55.1) and Germany (54.0). Italy (52.4) dropped to a 12-month low and France (50.0), despite hitting a 2-month high, only stagnated.

Taken at face value, the PMI data still point to first quarter Eurozone GDP growth of about 0.3 percent which, if accurate, would imply no pick-up in momentum from the second half of last year. Of most concern is the slowdown in new business which inevitably raises a serious question mark over prospects for the current quarter. Clearly, today's report is too early to reflect much, if any, of the impact from the March ECB ease but they certainly underscore the need for such action.

Definition
The Eurozone Composite PMI is produced by Markit and is based on original survey data collected from a representative panel of around 5,000 manufacturing and services firms. National manufacturing data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. National services data are included for Germany, France, Italy, Spain and the Republic of Ireland.

The Eurozone Services PMI (Purchasing Managers' Index) is produced by Markit and is based on original survey data collected from a representative panel of around 2,000 private service sector firms. National data are included for Germany, France, Italy, Spain and the Republic of Ireland. These countries together account for an estimated 80% of Eurozone private sector services output.


Description
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.