August 22, 2024 at 08:15AM
Prior 50.1
Manufacturing PMI 42.1 vs 44.4 expected
Prior 44.0
Composite PMI 52.7 vs 49.1 expected
Prior 49.1
The headline reading is a 27-month high and that lifts the French economy to post its best performance in terms of business activity since March last year. The big caveat here though is that the services sector is largely boosted by the Paris Olympics. While overall activity was better, there were declines to employment and also output expectations. So, it is likely to be a one-off. HCOB notes that:
“The French economy will likely grow 0.5% in the third quarter. The HCOB France Flash PMI for August indicates an
improvement in economic conditions, with the Composite PMI jumping over three index points to 52.7. This can be tracked
back exclusively to the service sector, with the business activity index rising almost five points. It should be emphasized that
August is likely an outlier due to the Olympic Games. However, the manufacturing sector continues to struggle, with
production declining even more sharply than in July.
“Service providers will have benefited from the Olympic Games. The HCOB Flash PMI for French services activity jumped to
55.0, its highest level since the second quarter of 2022 when GDP growth reached 0.4%. The one-off nature of this boost is
evident in the worsening employment situation, weaker output expectations and declining backlogs of work.
“French manufacturers are still struggling with weak demand. New orders declined for yet another month and at the fastest
pace since the COVID-19 pandemic. Given the decline in new export sales slowed, we can infer that the accelerated drop in
total new orders was domestically driven. However, factory prices increased at the quickest rate since March 2023. More
fittingly, the manufacturing employment situation worsened for another month, with jobs in the sector being shed by the
largest margin since May 2020.
“French companies are facing bleak prospects. The corresponding HCOB Flash PMI for output expectations in the coming
twelve months declined almost four index points. This decline was broad-based across the service and manufacturing
sectors, but more pronounced in the latter. Service providers may have revised their output expectations lower because
business activity was unusually high during July and August, most likely fuelled by the Olympic Games.”
This article was written by Justin Low at www.forexlive.com.
