FR: PMI Composite

Thu Jan 04 02:50:00 CST 2018

Consensus Actual Previous
Composite - Level 60.0 59.6 60.3
Services - Level 59.4 59.1 60.4

The private sector economy expanded slightly more slowly than originally reported in December. The flash composite output index was revised down 0.4 points to 59.6 to stand 0.7 points short of its final November outturn. The negative revision reflected the downward adjustment to the manufacturing PMI already reported and a 0.3 point shading of the flash services PMI which now prints at 59.1.

However, despite the fall from November's six-and-a-half-year high, the latest composite output reading still points to a very robust end to 2018 with economic growth well above its historic norm. As previously indicated, there was another sharp expansion in new orders as well as a further rise in backlogs and a sizeable increase in headcount. Business confidence also improved for a second successive month although it remained below the levels seen earlier in the year.

Input cost inflation eased somewhat despite another advance in charges and output prices also rose more slowly than in mid-quarter.

The details of the final December report suggest that the French economy is well placed for another solid quarter of growth at the start of 2018. However, while the buoyancy of both manufacturing and services points to broad-based strength, the output gap will still need to close further before any significant sustainable increase in CPI inflation is likely to be seen.

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.