FR: PMI Manufacturing Index

Wed May 02 02:50:00 CDT 2018

Consensus Actual Previous
Level 53.4 53.8 53.7

The final sector PMI weighed in at 53.8, up 0.4 points versus it flash reading, and now a tick higher than its final March print. However, it remains indicative of a sharp deceleration in business activity since the fourth quarter.

In contrast to the flash results, the updated survey found slightly stronger advances in output and employment compared with March but a smaller gain in new orders where growth was the weakest in more than a year. Another rise in backlogs suggests that past demand should help to support production near-term but business optimism still fell to a 7-month low.

Meantime, input costs climbed quite sharply, in part due to larger wage gains, although inflation eased slightly. Factory gate prices were also somewhat firmer.

The final April results offer hope that the deceleration in first quarter French manufacturing activity has run its course. However, if so, it would seem that growth may be stabilising at a lower level which, with core CPI inflation still running at only around 1 percent, may not be good news for the ECB.

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.