FR: PMI Composite FLASH

Mon Apr 23 02:00:00 CDT 2018

Consensus Actual Previous
Manufacturing - Level 53.4 53.4 53.6
Services - Level 56.6 57.4 56.8
Composite - Level 56.9 56.2

Private sector business activity was somewhat stronger than expected in April. At 56.9, the flash composite output index was up 0.6 points versus its final March reading and so reversed just over half of that month's decline.

The improvement was in part attributable to services where the flash PMI rose 0.5 points versus its final March readingto 57.4. Manufacturing also had a positive effect although a pick-up in the output sub-index (54.7 after 53.9) masked another fall in the flash PMI by 0.3 points to 53.4, a 13-month low.

Stronger growth of aggregate new orders was wholly due to services as manufacturing saw a slowdown and a similar pattern was true for employment. Backlog accumulation was also the weakest in eight months with a smaller gain in services contrasting with a stronger rise in manufacturing. Business sentiment regarding the year ahead was similarly a little lower.

Meantime, inflation news was mixed. Input costs were boosted by higher wages as well as more costly commodities but overall selling price inflation eased marginally.

Today's results would seem to confirm that bad weather negatively impacted the March economy. At 56.9, the April flash composite output is easily high enough to signal a solid start to current quarter. Moreover, strikes and protests over President Emmanuel Macron's reform agenda may have made for some downside bias. However, there are still signs that economic growth has shifted down a gear from the end of 2017 and inflationary pressures continue to build only slowly.

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.