France's manufacturing economy moved into an expansionary phase in August, with a final PMI reading pf 50.4, marking an improvement over the 49.9 flash reading and 48.2 in July, and above the 50-threshold marking expansion since January 2023. The result also was above the Econoday median forecast of 49.9.

Helping push the index higher was a slowing of the negative demand trend and an increased business confidence. That helped boost job creation to a 39-month high. Still, two of the main components, new orders and output, remained contractionary.

Respondents said there is reduced drag from foreign markets, signaled by a slower decline in export orders. They went on to say that there is a noticeable lack of new orders stemming from their US customers.

Inventories for pre- and post-production goods contracted, although not for an economically favorable reason. Businesses noted supplier delivery delays, marked by the worst vendor performance since January 2023. This suggests supply chain constraints which, should they persist, will hamper the manufacturing sector from building a stronger expansionary foundation.

It's still far too soon to sound the all-clear on the French manufacturing sector, but today's developments are a positive sign. It could also be that businesses feel that even with a 15 percent US tariff regime on the European Union, they are now able to factor that into their planning.

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.