The final March PMI confirmed a moderately respectable period for French manufacturing. At 53.3, the sector index was just 0.1 points short of its flash reading and a useful 1.1 points above its final February mark.
As previously indicated, the pick-up in momentum was led by a solid gain in new orders (the sharpest in seventy months) together with another healthy increase in production. Overseas demand was boosted by the weak euro. Backlogs also rose further, climbing at their steepest rate in some six years and employment was up too. Against this backdrop, firms were confident about output prospects for the coming year.
Input costs were boosted by the combination of higher raw material charges and soft exchange rate although factory gate prices remained subdued.
Today's report is in line with a gradual acceleration in the recovery in the manufacturing sector and the buoyancy of new orders bodes well for this quarter too. That said, activity rates remain relatively sluggish compared with many other Eurozone states and will need to improve is real GDP growth is to get close to the German rate on a sustainable basis.
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.