FR: PMI Composite

Thu Aug 03 02:50:00 CDT 2017

Consensus Actual Previous
Composite - Level 55.7 55.6 56.6
Services - Level 55.9 56.0 56.9

Overall business activity was fractionally weaker than originally thought in July. The final composite output index weighed in at 55.6, down just a tick from its flash estimate and a full point short of its final June print.

However, services were actually a little stronger than previously estimated with the flash sector PMI revised up 0.1 points to 56.0. That said, this was still nearly a full point short of its final outturn at the end of the second quarter. New orders growth remained sharp, albeit somewhat slower than in June, and backlogs were similarly up again. Gains here translated into another useful increase in headcount although, again, the rise was less marked than in June. Firms were optimistic about prospects for the year ahead but confidence still slipped to a 6-month low.

Input cost inflation decelerated to a 9-month low and factory gate prices fell once more. Although declining less than in June, the latest decrease in output prices extended the downtrend to nearly five-and-a-half years.

The July results suggest that the French private sector began the third quarter on a solid enough footing albeit at a slightly slower growth rate than in June. Sustained healthy gains in employment and new orders should be reflected in another decent quarter for real GDP but inflation pressures remain very subdued.

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.