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Manufacturing PMI 49.7 vs 48.9 prelimPrior 52.8The April growth, as expected, was short-lived as we see an unwinding to the frontrunning of stock in May. While the revised figures are better than initial estimates, it still points to a marginal contraction in business activity. Of note, there were fresh declines in production, new orders, purchasing volumes and stocks as
the tailwinds from client stockpiling dissipated.Meanwhile,
accelerated increases in both input costs and output charges
pointed to intensifying inflationary pressures across France’s industrial sector.Looking at the details, demand conditions were dealt a major setback with the sub-index for new orders
wiping out all of the gains made in April. Supply chain pressures were also more intense as vendor delivery
times lengthened to the greatest extent since January 2023. Besides that, panellists also noted that shortages of raw materials and transportation, high fuel
costs and front-loaded ordering squeezed supplier capacity further on the month.On the inflation front, the rate of input cost inflation jumped to a four-year high. Adding to that is French manufacturers raising their own prices charged in May,
and to the greatest degree in 40 months. Trouble, trouble.S&P Global notes that:”As expected, April’s expansion was fleeting. Frontloaded ordering has faded, replaced by falling new
business, production cutbacks and inventory reductions.
Supply chains are still adjusting to the volatility induced
by the war in the Middle East and ensuing energyprice shock. For example, more French manufacturers
experienced delivery issues and input price rises
than in April – pressures that could play out as higher
goods prices and supply issues across the economy
more broadly over the coming months. Unfortunately,
the policy levers that can meaningfully address the
problems created by an external shock on this scale are
limited for indebted nations like France.”
This article was written by Justin Low at investinglive.com.
💡 DMK Insight
The Manufacturing PMI dropping to 49.7 signals a contraction, and here’s why that matters: This figure, while slightly better than the preliminary estimate of 48.9, indicates that the manufacturing sector is struggling. A PMI below 50 typically reflects a decline in economic activity, which could lead to reduced demand for commodities and a bearish sentiment in related markets. Traders should keep an eye on how this affects the broader economic outlook, especially with inflation and interest rates still in play. If this trend continues, we could see a ripple effect on currencies tied to manufacturing exports, particularly the USD and JPY. Look for key levels around 50.0 as a psychological barrier; a sustained drop below this could trigger further selling pressure in equities and commodities. Additionally, monitor the upcoming economic indicators for any signs of recovery or further decline, as they could provide actionable insights for positioning in the forex and crypto markets. The real story is whether this contraction is a blip or the start of a more significant downturn.
📮 Takeaway
Watch the 50.0 level on the PMI; a sustained drop could lead to bearish trends in equities and related currencies.
