There were no revisions to the flash PMI in the final report for December. At 53.5, the headline index was up nearly two points versus its final November print to signal the fastest growth of manufacturing business activity in some sixty-seven months.
Output posted its largest increase since May 2011 supported by an equally marked advance in new orders. With backlogs also continuing to accumulate, job creation was the most significant since June 2011.
At the same time, inflationary developments were similarly positive. Hence, the increase in input costs was larger than in any month since June 2011 and average factory gate prices also edged firmer.
The PMI signals a moderately respectable end to 2016 by French manufacturing. As important as the increase in December output was the healthy bounce in orders which bodes well for the start of the New Year. Even so, the performance gap with its German counterpart remains sizeable and further progress will be required to bring domestic activity rates more into line with the Eurozone average.
The Manufacturing Purchasing Managers' Index (PMI) provides an estimate of manufacturing business activity for the preceding month by using information obtained from a representative sector survey incorporating around 400 companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The data are released by Markit.
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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