FR: PMI Composite

April 5, 2017 02:50 CDT

Consensus Actual Previous
Composite - Level 57.6 56.8 55.9
Services - Level 58.5 57.5 56.4

Economic activity was rather weaker than originally thought in March. The final composite output index weighed in at 56.8, still a 70-month high and almost a point above its final February print, but 0.8 points short of its flash estimate.

The downward revision was largely due to a softer services sector where the final PMI was 57.5, a full point below its flash reading but some 1.3 points higher than its final mid-quarter outturn.

As previously indicated, the buoyancy of services last month was built upon another strong increase in new orders which saw their largest gain in more than five-and-a-half years. Backlogs also accumulated more quickly than in any month since August 2011, in turn pointing to additional pressure on capacity despite the most marked rise in headcount in 67 months. Business confidence remained optimistic with the level of positive sentiment touching its highest mark in almost 6 years.

Price developments were mixed. While easing slightly, input cost inflation remained significant but service provider selling prices were again reduced amidst reports of continued tight market conditions.

Although not as robust as originally reported, the final March PMI data still suggest a decent first quarter for the French economy. Services continue to lead the way however, and a better balance will needed via a marked improvement in manufacturing to ensure the recovery's sustainability.

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.