FR: PMI Manufacturing Index

Thu Feb 01 02:50:00 CST 2018

Consensus Actual Previous
Level 58.1 58.4 58.8

The final January PMI confirmed a very healthy start to 2018 by French manufacturing. At 58.4, the revised sector index was 0.4 points stronger than its flash reading and just 0.4 points short of its final December level.

As previously signalled, activity was boosted by further rapid, if slightly slower, growth of output and new orders. Backlogs were also up again and at their fastest pace in more than eleven years while employment expanded at a rate close to its all-time high. Business confidence was also particularly positive, registering a new series peak.

Price developments were similarly firm with input cost inflation touching a 9-month high and its factory gate counterpart posting its strongest reading since July 2011.

Taken together with INSEE's latest upbeat business survey, the PMI points to a buoyant manufacturing sector in January with order books full enough to support strong growth of production over rest of the quarter.

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.