FR: PMI Manufacturing Index

Tue Apr 03 02:50:00 CDT 2018

Consensus Actual Previous
Level 53.6 53.7 55.9

The flash PMI was revised up just a tick to 53.7 in the final report for March. This still leaves a sizeable 2.2 drop versus its February reading and so remains in line with some additional cooling in economic activity from a particularly strong January.

As previously indicated, rates of expansion slowed for new orders, employment and output. That said, the level of each remained high enough to suggest at least moderate rates of growth. Indeed, backlogs continued to build and, while down from the mid-quarter's record high, business confidence was again robust.

Input cost inflation continued strong on the back of higher raw material costs and this was reflected in fresh gains in factory gate prices. Even so, the rate of cost inflation eased significantly versus February.

There is nothing new in today's report which remains in line with a strong first quarter for French manufacturing. Even so, there has clearly been some loss of momentum during the period and growth looks likely to ease in the second 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.