FR: PMI Composite FLASH

Fri Jun 23 02:00:00 CDT 2017

Consensus Actual Previous
Manufacturing - Level 54.0 55.0 54.0
Services - Level 57.0 55.3 58.0
Composite - Level 55.3 57.6

According to the flash PMI results, French economic growth cooled somewhat more quickly than expected at the end of the second quarter. At 55.3, the composite output index was down 1.6 points versus its final May outturn and, while still comfortably above the 50-growth threshold, at its lowest mark in five months.

However, at least the overall slowdown masked a much improved sectoral balance. Hence, the flash manufacturing PMI climbed 1.8 points to 55.0 while its services counterpart dropped nearly 2 points to 55.3.

Growth of aggregate new orders was actually faster than in mid-quarter and although there was a reduced gain in backlogs, this probably reflected a sharp increase in headcount. Overall employment saw its steepest advance in nearly a decade and was broad-based across both sectors. Business confidence in the year ahead still fell to a 5-month low but remained elevated.

Meantime, total input costs continued to increase in June but the inflation rate dipped for a second consecutive month due to a fall in manufacturing. Manufacturers raised their factory gate prices but this was offset by a reduction in service provider charges that saw aggregate output prices decrease for the first time in three months.

The provisional PMI data suggest that the economy had a good second quarter. June might not have been the best month but the surge in employment is particularly good news. Not only does it underline a high level of business confidence but it could also give household consumption, which was only flat last quarter, a handy boost. Nonetheless, inflation trends are still worryingly soft.

The flash Composite Purchasing Managers' Index (PMI) provides an early estimate of current private sector output by combining information obtained from surveys of around 750 manufacturing and service sector companies. The flash data are released around ten days ahead of the final report and are typically based upon around 85 percent of the full survey sample. 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 flash estimates of the manufacturing and services PMIs. The data are produced 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.