FR: PMI Manufacturing Index

February 1, 2017 02:50 CST

Consensus Actual Previous
Level 53.4 53.6 53.5

The final manufacturing PMI weighed in at 53.6 in January, up a couple of ticks versus its final December reading and a 68-month high.

As previously indicated, the new year began with solid gains in output and new orders although the growth rates of both were slightly short of last time. Backlogs were also up despite a third successive increase in headcount, January's rise being the most marked since July 2011. Purchasing activity similarly expanded significantly.

Meanwhile input cost inflation surged to a five and half year high and, more importantly, factory gate prices were hiked more rapidly than at any time since October 2012.

Overall then, the results would seem to confirm a respectable January for French manufacturing. Rising new and unfilled orders also bode well for the rest of the quarter. Nonetheless, France continues to underperform by some way the Eurozone average (55.2) and upcoming elections in April/May could well provide an unwanted boost to uncertainty.

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.