FR: PMI Composite FLASH

Thu Mar 22 03:00:00 CDT 2018

Consensus Actual Previous
Manufacturing - Level 55.5 53.6 56.1
Services - Level 57.1 56.8 57.9
Composite - Level 56.2 57.8

Private sector economic activity slowed in March according to new flash PMI survey. At 56.2, the key composite output index dropped more than a point versus its final February outturn to signal the slowest rate of expansion in seven months.

The overall deceleration reflected some cooling in both the manufacturing and service sectors. The flash PMI for the former weighed in at 53.6, weaker than expected and a 2.3 point fall versus February's final reading. It was also a 12-month trough. At the same time, services decreased a smaller 0.6 points to 56.8, similarly short of the market consensus and its worst outturn in seven months.

Slower growth of new orders did much of the damage although rates in both sectors remained historically high and firm enough to ensure another respectable increase in headcount. Indeed, backlog accumulation actually accelerated to one of the fastest rates in the current 25-month upswing. Business confidence also stayed firmly positive, albeit off February's 9-month peak.

Inflation pressures eased a little more but both input costs and, in particular, factory gate prices continued to make significant gains.

At 57.7, the first quarter average composite output index is easily high enough to indicate another quarter of robust French economic growth. GDP may not match the 0.6 quarterly rate posted in October-December but overall the period looks to have been healthy enough.

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.