| Consensus | Actual | Previous | |
|---|---|---|---|
| Index | 42.0 | 42.1 | 42.9 |
Highlights
The French manufacturing sector remained extremely subdued in December, suggesting that third quarter weakness stretched into the final months of the year.
The manufacturing PMI fell to 42.1 last month, the lowest level since May of 2020, and well below the reading of 42.9 recorded in November. While that's marginally stronger than the flash estimate of 42.0 (also the consensus forecast), manufacturing activity remains well below the break-even level of 50.
New orders contracted"considerably", according to S&P Global, with export demand particularly weak. However, the outlook for 2024 was mixed; close to one third of respondents expect production to fall further, even as a future activity sub index rose to a five-month high.
Crucially, the previously resilient employment market seems to be softening, with manufacturers cutting workforce numbers for the seventh straight month, although the headcount reduction was less marked than in November. ECB officials have cited a tight labor market and the risk of higher wage demands as a key inflationary concern.
The data suggest that France could suffer another manufacturing downturn in the fourth quarter. PMI data ranged from 44.2 to 46.0 in the third quarter, meaning the sector could turn in an even softer performance than the 0.3 fall percent recorded previously.
Final December composite PMIs for France and the eurozone are due on Thursday and come amid hot debate over the timing of a rate cut from the European Central Bank. ECB officials including President Christine Lagarde have insisted that the governing council has yet to even discuss reducing borrowing rates. But that has not prevented market bets on a rate cut coming as soon as April. None of the members of the Bank's executive board are currently scheduled to speak publicly this week.
The data lift the French RPI to 10 and the RPI-P to 8, meaning the economy in general is performing marginally better than expected.
The manufacturing PMI fell to 42.1 last month, the lowest level since May of 2020, and well below the reading of 42.9 recorded in November. While that's marginally stronger than the flash estimate of 42.0 (also the consensus forecast), manufacturing activity remains well below the break-even level of 50.
New orders contracted"considerably", according to S&P Global, with export demand particularly weak. However, the outlook for 2024 was mixed; close to one third of respondents expect production to fall further, even as a future activity sub index rose to a five-month high.
Crucially, the previously resilient employment market seems to be softening, with manufacturers cutting workforce numbers for the seventh straight month, although the headcount reduction was less marked than in November. ECB officials have cited a tight labor market and the risk of higher wage demands as a key inflationary concern.
The data suggest that France could suffer another manufacturing downturn in the fourth quarter. PMI data ranged from 44.2 to 46.0 in the third quarter, meaning the sector could turn in an even softer performance than the 0.3 fall percent recorded previously.
Final December composite PMIs for France and the eurozone are due on Thursday and come amid hot debate over the timing of a rate cut from the European Central Bank. ECB officials including President Christine Lagarde have insisted that the governing council has yet to even discuss reducing borrowing rates. But that has not prevented market bets on a rate cut coming as soon as April. None of the members of the Bank's executive board are currently scheduled to speak publicly this week.
The data lift the French RPI to 10 and the RPI-P to 8, meaning the economy in general is performing marginally better than expected.
Market Consensus Before Announcement
No revision is expected to the flash data leaving the sector PMI at 42.0, down from November's final 42.9.
Definition
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.
Description
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.
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.
