FR: PMI Manufacturing Index

Tue Jan 02 02:50:00 CST 2018

Consensus Actual Previous
Level 59.3 58.8 57.7

The flash manufacturing PMI was revised down 0.5 points to 58.8 in the final report for December. Despite the negative adjustment, the new reading still constituted its highest outturn since September 2000 and so confirmed a particularly buoyant performance by the sector at year-end.

As previously indicated, headline strength reflected rapid growth of output and new orders as well as a healthy net addition to headcount. Backlogs were also up at their fastest pace since November 2006 and further evidence of rising capacity pressures was apparent in the sharpest increase in lead times since March 2011. Meanwhile, business confidence climbed to its highest mark on record.

Inflation news was mildly positive with factory gate prices rising again despite a deceleration in input costs.

December was a very good month for French manufacturing and healthy levels of demand already in the pipeline bode well for the start of 2018. Nonetheless, inflation in the sector is still picking up only quite slowly.

The Manufacturing Purchasing Managers' Index (PMI) provides an estimate of manufacturing business activity for the preceding month by using information obtained from a representative sector survey incorporating around 400 companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The data are released 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 ISM manufacturing index in the U.S. and the Markit PMIs elsewhere, 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..

The Markit PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.