The improvement in French manufacturing activity at the start of the year was less marked than originally thought. At 50.5, the final sector PMI was 0.3 points short of its flash estimate and now 1.3 points stronger than its final reading at the end of 2022. That said, at least it was back above the 50-expansion threshold.

As shown in the preliminary data, new orders continued to contract but at a reduced pace versus December, a similar pattern also applying to manufacturing output. Employment growth was positive and expectations about future production climbed to their highest level since August.

The downward trend in input cost inflation was extended with costs rising at the weakest rate since December 2020. That said, efforts to restore profit margins saw firms raise their output prices by the most since July.

In sum, today's update suggests that French manufacturing was still struggling in January, albeit less so than in recent months. The sector may well subtract from first quarter GDP growth. To this end, the French ECDI and ECDI-P now stand at minus 11 and minus 5 respectively, indicating that overall economic activity is once again slipping behind market expectations.

No revisions are expected to the flash data.

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 S&P Global.

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 S&P Global 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 S&P Global 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.