FR: PMI Composite

June 5, 2017 02:50 CDT

Consensus Actual Previous
Composite - Level 57.6 56.9 56.6
Services - Level 58.0 57.2 56.7

The flash composite output index was revised down an unusually large 7 ticks to 56.9 in the final report for May. This put it 0.3 points above its final April print and only just shy of March's near-six-year high.

As previously indicated, the buoyancy of the headline measure was attributable to robust services. Even so, the flash sector PMI was still revised 0.6 points lower to 57.2 versus a final 56.7 last time. Orders were up for a fifteenth consecutive month and growth here remained strong, albeit easing to a 4-month low. Backlogs were also firmer despite job creation posting its fastest rate since August 2011 and sentiment about the year ahead climbed to its highest level since April 2011.

Inflation developments were mixed. Input costs continued to rise and while the rate of inflation was down slightly from April, it remained marked. However, selling prices were lowered for a remarkable sixty-second consecutive month although the rate of decrease was only small and in line with that recorded at the start of the quarter.

Despite the disappointing headline revision, May was a good month for French services and a moderately decent one for manufacturing (PMI 53.8). With orders firm and optimism high, second quarter GDP growth should at least match the 0.4 percent quarterly rate registered at the start of the year.

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.