FR: PMI Composite

Fri May 04 02:50:00 CDT 2018

Consensus Actual Previous
Composite - Level 56.9 56.9 56.3
Services - Level 57.4 57.4 56.9

April's final composite output index weighed in at 56.9, unchanged from its flash estimate and so still indicative a slight improvement in overall business activity rates versus March (56.3).

The stable headline masked the minor positive revision to the flash manufacturing PMI (now 53.8) but reflected an unrevised final services index (57.4). The latter was up 0.8 points from its final March outturn.

Services saw continued growth of new business as well as a larger addition to headcount. Backlogs also rose again, albeit by the smallest amount in the last six months, while business confidence held steady at the previous month's level.

Input cost inflation remained strong amid reports of higher employee salaries. However, the rate eased for a third consecutive month. In turn, this accommodated a further softening of charge inflation which posted its weakest rate in the current 8-month period of increases.

Today's update leaves services as the dominant force behind the ongoing expansion in French GDP which remains relatively solid. That said, the latest sector PMI compares with readings in excess of 60 over the closing months of last year so even here there has been a clear loss of momentum. Bad weather and industrial action probably played a part but underlying growth has cooled and, while early days yet, the latest orders update would not seem to signal any significant bounce-back this quarter.

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.