France’s private sector growth slowed in July, reflecting a contraction in the manufacturing sector due to weaker demand, flash survey results from S&P Global showed on Friday.
The flash composite output index fell to 50.6 from 52.5 in June. The reading was forecast to fall moderately to 51.8. Nonetheless, a reading above 50.0 indicates expansion.
The score signaled the slowest pace of expansion in the current 16-month sequence of growth.
At the sector level, there were notable differences once again in manufacturing and services performances. Manufacturing output contracted in July, while services activity posted a softer growth.
The manufacturing Purchasing Managers’ Index fell to 20-month low of 49.6 in July from 51.4 in June. This was also below economists’ forecast of 50.8.
At the same time, the services PMI came in at 52.1, down from 53.9 a month ago and the expected score of 52.7.
“July ‘flash’ PMI data raises further concerns that the French economy is heading towards a recession as data signaled worsening trends across a number of key indicators,” Joe Hayes, a senior economist at S&P Global Market Intelligence said.
Goods production declined at the sharpest rate since during the first phase of COVID-19 lockdown restrictions in May 2020. In the service sector, the business activity logged the weakest rise since April 2021.
For the first time since February 2021, new business intakes at French private sector companies declined. Companies cited client hesitancy, higher prices, as well as a general deterioration in underlying demand conditions as factors dampening demand.
Nonetheless, there was a sustained growth in employment across the French private sector. For the first time in close to a year-and-a-half, backlogs of work declined in July.
On the price front, the survey showed a fractional uptick in the rate of output price inflation in July, though it remained softer than May’s record. On the other hand, input prices rose to the slowest extent in five months.
Finally, output expectations remained positive in July and strengthened slightly from May’s 19-month low.
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