- Prior 49.6
- Manufacturing PMI 48.4 vs 48.5 expected
- Prior 48.1
- Composite PMI 49.6 vs 49.3 expected
- Prior 49.2
The reading reaffirms a continued pick up in momentum in the French economy, but still largely short of crossing over the pivotal 50.0 mark. The good news is that services activity continues to improve with the headline reading being a 11-month high. That said, there are some notable weak spots in the report with new orders seen decreasing markedly and at an accelerated pace while business confidence
deteriorated sharply to its weakest since last November. HCOB notes that:
“The latest HCOB Flash PMIs from France are neither fish nor fowl. While momentum has been trending upward since the
beginning of the year, the index remains below the critical 50-point threshold. This continues to signal a deterioration in
economic conditions, albeit one that is only marginal. France remains under considerable pressure, both economically and
politically. GDP growth is unlikely to exceed the 1% mark this year. At the same time, questions are mounting over whether
Prime Minister Bayrou can sustain his austerity course politically. Global trade upheaval is compounding the strain on
France as a business location, though the recent deal between Washington and Tokyo may bring a potential EU–US
agreement closer within reach.
“Conditions in the service sector remain subdued. Business activity is stagnating at a low level, showing little movement
compared to June. Particularly concerning is the sharp decline in the sub-index for future business expectations. This drop is
likely a direct response to Bayrou’s draft budget proposal, presented in parliament last week. Should an agreement on the
austerity package be reached, it would reduce disposable income for many households—posing clear downside risks for
domestic demand and especially for the services sector. Conversely, failure to reach a budget deal could further escalate
political uncertainty.
“The situation in the manufacturing sector also remains tense. The slight uptick in the headline index should not be
overinterpreted. Of greater concern is the sharp decline in forward-looking sub-indices: both order intakes and business
expectations fell significantly in July. This likely represents increased domestic uncertainty due to the fresh austerity
proposal, and international unease stemming from protectionism in global trade policy. There is, however, a faint glimmer of
hope on the pricing front as after a period of price reductions, output prices edged up again in July, helping firms to recoup
margin losses in recent months.”
This article was written by Justin Low at investinglive.com.