FR: PMI Composite

May 4, 2017 02:50 CDT

Consensus Actual Previous
Composite - Level 57.4 56.6 56.8
Services - Level 57.7 56.7 57.5

The French economy slightly underperformed original estimates in April according to the final PMI data for the month. At 56.6, the composite output index was revised down 0.8 points versus its flash reading and now stands 0.2 points below its final March print.

The downward adjustment to the headline measure was wholly due to a softer services sector where the PMI weighed in at 56.7, a full point short of its flash estimate and 0.8 points below its final mark at the end of the first quarter.

Despite the negative adjustment, services were still in good shape in April with strong growth of new orders and a particularly marked rise in outstanding business. Headcount was also up for the fourth time in as many months. Sentiment was notably robust and climbed to a 6-year high on the back of hopes for a more favourable corporate environment after next Sunday's French presidential election.

Service sector input costs continued to increase, extending the trend that began back in January 2010 and accelerating from their March rate. However, average charges fell again amidst reports of strong competition and have now declined for some sixty-one consecutive months.

If a little disappointing, the final April PMI data still suggest a solid start by the French economy to the second quarter. Should May and June follow suit, real GDP growth ought to exceed the first quarter's 0.3 percent quarterly rate quite comfortably.

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.