FR: PMI Composite

Thu Apr 05 02:50:00 CDT 2018

Consensus Actual Previous
Composite - Level 56.2 56.3 57.3
Services - Level 56.8 56.9 57.4

Economic activity was just marginally stronger than originally thought last month. At 56.3, the final composite output index was a tick stronger than its flash estimate but still a full point short of its final February reading and indicative of the weakest growth since August last year.

The minor upward revision in part reflected a minimal positive adjustment to the services PMI which was nudged 0.1 points firmer to 56.9. However, this was also short of its final mid-quarter mark (57.4). As previously indicated, new business expanded at a slower rate but remained well above its long-run average. The same was true of job creation but backlog accumulation was actually up on February. Business confidence in the year ahead remained positive and, while slightly softer than in February, was similarly well above its historic norm.

Input costs continued to rise, but the rate of increase eased versus the previous period and also dipped below its long-run average. In turn, this accommodated a smaller hike in selling prices.

The minor revisions leave intact a picture of respectable, but slowing French economic growth during the first quarter. Second quarter prospects still look reasonable but inflationary pressures remain uncomfortably soft for the ECB.

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.