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Will France’s Improving Manufacturing PMI Speed up Economic Growth?

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France’s October manufacturing PMI

According to the data provided by Markit Economics, France’s manufacturing PMI (purchasing managers’ index) stood at 51.8 in October 2016, as compared to 49.7 in September, which is just above the initial estimate of 51.3.

France’s manufacturing PMI in October showed a first-time expansion in manufacturing PMI after a contraction in the last seventh consecutive months. However, the October figure is far above the September figure. A level above 50 indicates expansion in the economy, while anything below 50 indicates contraction.

The improvement in France’s manufacturing PMI was mainly due to the following:

  • Production volume and output rose sharply in October 2016.
  • October PMI data showed improvement after a slowdown for the seventh time since March 2016.
  • Export orders and new orders also rose at a higher rate in October 2016.
  • Employment growth remained unchanged in October 2016.
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Performance of various ETFs in October

The iShares MSCI France ETF (EWQ), which tracks France’s performance, fell 0.5% in October 2016. The Vanguard FTSE Europe ETF (VGK), which tracks Europe’s (HEDJ) (EZU) economic performance, fell 3.5% in October 2016.

The continuous fall in manufacturing PMI confirms that economic activity has been falling in France (EWQ). The economy also got a major shock from the United Kingdom’s Brexit vote. Trade relations between the UK (EWU) and France could suffer, and both economies may experience a fall in exports and orders.

However, the rise in manufacturing PMI in October after the continuous contraction in the past seven months indicated a sentiment that the economy is changing. Investor confidence in the economy is slowly improving, but the various indexes still show nervousness, given the uncertainty surrounding the upcoming US election.

In the next part of this series, we’ll analyze the Germany’s manufacturing PMI in October 2016.

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