FR: PMI Composite FLASH

July 24, 2017 02:00 CDT

Consensus Actual Previous Revised
Composite - Level 56.4 55.7 55.3 56.6
Manufacturing - Level 54.6 55.4 55.0 54.8
Services - Level 56.7 55.9 55.3 56.9

Preliminary data for the French composite PMI survey shows a drop in the headline index to 55.7 in July from 56.6 in June (revised up from a flash estimate of 55.3). This falls short of the consensus forecast of 56.4. The decline in the composite index was driven by a fall in the services index, down from 56.9 in June (revised from 55.3) to 55.9 in July. This was partly offset by an increase in the manufacturing index, up from 54.8 in June (revised from 55.0) to 55.4 in July.

If final data for July, scheduled for release early next month, confirms the drop in the composite PMI headline index, this will be the second consecutive fall in the index and take it to its lowest level since January. The services index has also fallen for two months and is at its lowest level since January. The manufacturing index, in contrast, has risen for two consecutive months and in four of the last five months and is now at its highest level since 2011.

Despite the rise in the headline index for the manufacturing sector, the flash survey shows a drop in the sector's output index from 55.4 in June to 54.8 in July, a four-month low. The services sector index shows activity continued to post strong growth in July but at a slower pace than in June. Respondents in the manufacturing sector reported steady growth in new business in July, whereas service sector respondents reported slightly weaker growth after a multi-year high in June.

The manufacturing survey also showed an improvement in employment and business confidence in July, while the services survey showed small declines - but still positive levels - for both of these indicators. Both surveys showed somewhat weaker growth in input costs but little change in selling prices, with manufacturers reporting a solid increase in factory gate charges but services firms reporting a modest decline.

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.