The flash PMI was unrevised in the final report for March. At 49.6 the headline index was down 0.6 points versus its final February reading and, more worryingly, back below the 50 growth threshold again.
As previously indicated, actual production rose slightly but new orders declined and growth of backlogs eased to its slowest pace so far in 2016. Employment shrank for the first time in four months and, while quite modest, at its sharpest rate in fifteen months.
Input costs fell for a seventh straight month and more quickly than in any month in the last year. Factory gate prices were also trimmed again, extending their downward run to some twenty-five months.
There is nothing really new in today's report which, if accurate, simply confirms a poor first quarter for French manufacturing activity.
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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