FR: PMI Manufacturing Index

May 2, 2017 02:50 CDT

Consensus Actual Previous
Level 55.1 55.1 53.3

The final French manufacturing PMI weighed in at 55.1, unrevised from its flash estimate and 1.8 points higher than its final March reading.

As previously indicated, the buoyancy of the headline index reflected rapid growth of output and new orders, both touching 6-year highs. Within the latter, exports were up more quickly than in any month since April 2011. Employment also expanded for a sixth consecutive month and at a somewhat faster pace than at quarter-end. Despite this, backlogs were up again and, with vendor performance the weakest since May 2011, suggest a steady build-up of pressure on capacity utilisation.

Meantime, inflation trends remain positive with input costs rising at their sharpest rate in almost six years and selling prices also firming.

Today's unrevised report leaves intact the impression of a decent beginning for the French economy to the second quarter after a relatively sluggish start to the year. Forward looking indicators seem reasonably optimistic and even output prices appear to be moving in the right direction. The main problem is probably unemployment which remains uncomfortably high although, if the PMI is to be believed, this too should be less of an issue over coming months.

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.