How France’s Unchanged Manufacturing PMI in October Could Affect Markets

According to data provided by Markit Economics, the final France manufacturing PMI (purchasing managers’ index), remained unchanged in October 2017, standing at 56.1 and falling short of the preliminary market estimate of 56.7.

Remember, a level above 50 indicates expansion in economic activity, while anything below 50 indicates contraction. The expansion in manufacturing activity in France is signaling that business conditions are strengthening.

France’s manufacturing PMI performance in October was mainly due to the following:

• rising production volumes and output in October
• new business order and export order improvements in October (though these improvements were weaker)
• improved employment in the manufacturing sector in October

The iShares MSCI France ETF (EWQ), which tracks France’s performance, rose 1.6% in October 2017. The iShares MSCI Eurozone ETF (EZU), which tracks the performance of the Eurozone (HEDJ) (FEZ) (IEV), rose 1.2% that month.

The manufacturing sector represents a significant portion of France’s GDP (gross domestic product). According to the 2016 estimation report provided by the Central Intelligence Agency, the industrial sector represents 19.6% of France’s economy, while the service and agriculture sectors represent 78.8%, and 1.6%, respectively, of France’s economy.

The improvement in France’s manufacturing activity signals that domestic demand is likely improving significantly, which could be very helpful for the economy going forward.

In the next part, we’ll analyze Germany’s final manufacturing PMI for October 2017.