FR: PMI Composite FLASH

Tue Oct 24 02:00:00 CDT 2017

Consensus Actual Previous
Manufacturing - Level 56.0 56.7 56.0
Services - Level 56.6 57.4 57.1
Composite - Level 57.5 57.2

French economic activity looks to have held up very well this month. At 57.5, a 77-month peak, the flash composite output index was up 0.3 points versus an already very robust September reading and reflected continued solid performances by both the manufacturing and service sectors.

The flash manufacturing PMI was a higher than expected 56.7, a useful 0.6 points above its final September mark with output (58.1) at its best level in seventy-eight months. At the same time, its services counterpart gained 0.4 points to 57.4, a 7-month high and also on the strong side of the market consensus.

Aggregate new business expanded very rapidly and employment growth was the most marked in ten-and-a-half years. Not surprisingly, business confidence remained positive. Meantime, input costs and output prices both picked up, the former for a second successive month and, while still historically subdued, at the sharpest rate since March 2012.

Today's results provide further evidence that the French economic recovery has shifted up a gear. The Bank of France is currently forecasting a 0.5 percent quarterly rise in real GDP for the July-September period (flash data due next week) and the preliminary October PMI findings suggest at least an equally robust fourth quarter.

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.