FR: PMI Composite FLASH

Thu Dec 14 02:00:00 CST 2017

Consensus Actual Previous
Manufacturing - Level 57.2 59.3 57.5
Services - Level 59.9 59.4 60.2
Composite - Level 60.0 60.1

December's flash PMI survey points to a solid end to 2017 by the French private sector. At 60.0, the key composite output index provisionally weighed in just 0.3 points short of its final November mark and easily high enough to signal another very good month for business activity.

The headline dip reflected a slight slowdown in activity in the services sector where the flash PMI stood at 59.4, a 1 point fall versus its final November mark but still very robust. By contrast, its manufacturing counterpart rose 1.6 points to 59.3, a 207-month high.

Despite the deceleration in services, there were further healthy gains in aggregate new business, employment and backlogs, albeit led by manufacturing. Indeed, business confidence in the year ahead improved in both sectors.

Inflation pressures continued to build although inflation was down slightly from November's near six-and-a-half-year high. Overall selling prices were also quite firm, registering their fourth consecutive increase. That said, the rate of charge inflation slipped versus mid-quarter and historically was only weak.

Still, December would appear to have been another very healthy period for French business activity and real GDP growth could well match the 0.6 percent quarterly pace achieved in April-June. However, this will probably need to be sustained if underlying CPI inflation trends are to turn up significantly anytime soon.

The flash Composite Purchasing Managers' Index (PMI) provides an early estimate of current private sector output by combining information obtained from surveys of around 750 manufacturing and service sector companies. The flash data are released around ten days ahead of the final report and are typically based upon around 85 percent of the full survey sample. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains flash estimates of the manufacturing and services PMIs. The data are produced 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 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.