FR: PMI Composite

February 3, 2017 02:50 CST

Consensus Actual Previous
Composite - Level 53.8 54.0 53.1
Services - Level 53.9 54.1 52.9

The flash composite output index for January was revised up a couple of ticks in the final report. At 54.0, the headline index was also nearly a full point above its final December reading and at a 19-month high.

The positive adjustment was largely due to a stronger services sector where the flash PMI was similarly revised up 0.2 points to 54.1, a 1.2 point gain versus year-end and a 67-month peak. As previously signalled, the upturn in services was led by new orders which expanded at their fastest pace in a year and a half. Backlogs also posted another solid gain but employment increased only modestly, possibly reflecting a slight softening in business expectations for the year ahead.

Price pressures continued to build with both input costs, and to a lesser extent, selling prices recording further rises.

Overall today's report would seem to confirm a gradual improvement in the French economy. However, the recovery is still sluggish relative to the Eurozone average and the sluggish jobs market remains a threat to private consumption.

The Composite Purchasing Managers' Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of around 750 manufacturing and service sector companies. 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 the final estimate of the services PMI. The data are provided 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.