FR: PMI Composite

Tue Sep 05 02:50:00 CDT 2017

Consensus Actual Previous
Composite - Level 55.6 55.2 55.6
Services - Level 55.5 54.9 56.0

A moderately good period for the French economy in August was confirmed in the final PMI report for the month. However, at 55.2 the composite output index was 0.4 points short of both its flash estimate and its final reading in July.

The downward revision reflected a slightly softer services sector where the flash PMI was lowered 0.6 points to 54.9. As indicated in the flash results, new business in the services sector continued to expand but at a slower rate than in July (7-month trough) and the same was true of backlogs. Headcount also rose at a healthy clip, albeit similarly short of the rate last time. Business confidence in the year ahead was strong but eased versus July in line with the economy-wide result.

Service provider input costs remained on an upward trend but inflation slowed versus July to a 1-year low. There was also more bad news on output prices which fell at their steepest rate in nine months.

The downward revisions to the headline data suggest that the private sector lost a little momentum in mid-quarter. Still, new orders are expanding solidly and business confidence remains high. Third quarter real GDP growth should still be close to the 0.5 percent quarterly rate recorded in April-June.

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.