FR: PMI Composite FLASH

Thu Nov 23 02:00:00 CST 2017

Consensus Actual Previous
Manufacturing - Level 55.9 57.5 56.7
Services - Level 57.0 60.2 57.4
Composite - Level 60.1 57.5

The flash PMI data suggest that November was a surprisingly strong month for French private sector business activity. At 60.1, the key flash composite output index was up almost 3 full points versus its final October reading and at its highest level in some seventy-eight months.

Better still, the headline improvement reflected healthy gains in both the flash manufacturing and service sectors PMIs. Versus their respective final October prints, the former increased 1.4 points to 57.5, a 79-month peak, while the latter jumped 2.9 points to 60.2, another 78-month high.

Aggregate new orders saw their largest advance since May 2011 within which growth in manufacturing registered a near-7-year record. At the same time, backlogs continued to accumulate at a rapid pace and that despite the sharpest net addition to headcount in more than sixteen years. Overall business confidence remained optimistic despite a marginal softening amongst manufactures.

Price developments were quite firm and with input cost inflation climbing to a multi-year high, output prices posted only their sixth increase since April 2012.

The November results are impressive and consistent with the results of the INSEE survey just released. Fourth quarter GDP growth looks to be comfortably on course to at least match the 0.5 percent quarterly rate achieved in the July-September period.

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.