FR: PMI Composite FLASH

Fri Sep 22 02:00:00 CDT 2017

Consensus Actual Previous
Manufacturing - Level 55.5 56.0 55.8
Services - Level 54.8 57.1 55.5
Composite - Level 57.2 55.6

According to the flash PMI report, the French economy ended the third quarter on a surprisingly robust note. In particular, the key flash composite output index rose fully 2 points versus its final August print to 57.2, its highest reading in some seventy-six months.

Moreover, the headline improvement was a reflection of stronger performances by both the manufacturing and service sectors. The flash PMI for the former gained only 0.2 points but, at 56.0, this was its best outturn in seventy-seven months. At the same time, its services counterpart jumped some 2.2 points to 57.1, a 4-month peak.

Manufacturing output registered its sharpest increase since April 2011 and both sectors enjoyed healthy gains in new orders, notably services. Aggregate job creation was broad-based but backlogs still accumulated at a rate that was only just short of May's 6-year peak. Against this backdrop, it was hardly surprising that business confidence in the year ahead became more optimistic in both sectors.

Inflation developments were positive. The rate of increase in overall input costs accelerated for the first time in five months and selling prices also edged firmer. Services saw their first rise in output charge inflation in more than five years.

Today's report points to a very solid performance by the French private sector this month. The national central bank has forecast a quarterly increase in real GDP of 0.5 percent this quarter and these data certainly support something close to that figure, if not even stronger. They also make for some upside risk to the full Eurozone flash PMI release due shortly.

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.