| Consensus | Consensus Range | Actual | Previous | |
| Composite Index | 48.8 | 49.9 | ||
| Services Index | 48.3 | 48.3 to 48.3 | 48.8 | 49.6 |
Highlights
The service sector fell further into contraction in March as input costs rose to a 20-month high. The latest reading of the services PMI was 48.8 in March, down from 49.6 in February.
Already under pressure before the breakout of hostilities in the Middle East, order books weakened further in March. Before the conflict, French businesses were expecting a pickup in activity in the coming twelve months, but that is changing.
Despite the increase in production costs, mainly due to higher fuel prices, businesses refrained from passing along price increases, with some even discounting, presumably to maintain market shares. Respondents indicated tough price competition.
A further development is employment, where service providers are shedding jobs for the first time since the end of last year. They had been hiring on expectations of increased businesses; further evident the conflict is dampening sentiment. For the most part, firms were not replacing job leavers.
The composite index which also includes the manufacturing sector, slipped to 48.8 in March from 49.9 in February. This marks the fastest decline in sentiment since October.
Increased prices and weakening demand are a recipe for creating an environment of stagflation.
Market Consensus Before Announcement
The consensus sees no revision in the final services index from the flash at 48.3 for March versus 49.6 in February.
Definition
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 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 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.