The moribund French economy is holding back the recovery in the eurozone, according to the latest figures.
Markit’s index of activity in the nation–where 50 is the cut off between growth and decline–came in at just 50.5 this month. That was well below the German score of 53.8 and contributed to a score of 53 across the eurozone, news outlets reported.
Chris Williamson, chief economist at Markit, said: “Germany and the rest of the region are enjoying more robust expansions by comparison.”
The eurozone business activity slipped in April, a closely watched survey showed Friday, and the outlook remains gloomy despite major stimulus measures from the European Central Bank.
Markit said its April Composite Purchasing Managers Index inched down to 53.0 points from a revised 53.1 points in March, and pointed to France as a major brake on the region’s recovery.
France PMI data released earlier Saturday showed that after broadly stagnating on average during the opening three months of the year, French private sector economy posted a marginal growth at the start of Q2 2016. The Markit Flash France Composite Output Index, based on around 85% of normal monthly survey replies, recorded 50.5, up from 50.0 in March.
Data was a mixed bag. The index covering services rose to 50.8 in April, from the slightly sub-50 mark indicating contraction in March, beating forecasts for a rise to 50.1. The manufacturing index, however, dropped unexpectedly to 48.3, an eight-month low.
The more dominant service sector was picking up a lot of the slack from manufacturing, which was weighed down by a sharp drop in incoming new orders. French service providers maintained positive business expectations in April. That said, the degree of optimism slipped to a four-month low and remained weaker than the survey’s historical average.
“The PMI data continue to paint a picture of a private sector economy stuck in a weak growth trajectory accompanied by little meaningful job creation,” notes Jack Kennedy, senior economist at Markit.
Taxing Time
French Economy Minister Emmanuel Macron has suggested that France should scrap its wealth tax and raise inheritance taxes instead, breaking a longstanding Socialist taboo and drawing the ire of Prime Minister Manuel Valls.
The “Solidarity Tax on Wealth”, or ISF, dates back to 1981 when it was created under Socialist president Francois Mitterrand (it was originally called the “Tax on Large Fortunes”).
It was abolished briefly under conservative prime minister Jacques Chirac in 1986, and then resurrected as the ISF in 1989 after Mitterrand’s re-election.
Under the current rules, the ISF taxes fortunes above €1.3 million ($1.46 million) at 0.5%.
Speaking to insurance industry publication “Risques” this week, Macron said: “I believe that taxing wealth is not efficient... and it would be preferable to increase inheritance taxes instead.”
Macron also told “Risques” that he wanted to reverse France’s 2011 “Exit Tax”, designed to prevent businesses from relocating outside France, believing that it “encourages young people to establish business abroad from the beginning”.
Valls told France Info radio that while the government was doing everything possible to relieve pressure on France’s poorest citizens, “cancelling this tax, which could be greatly improved, would be a mistake”.
“I would ask every minister, given that we have one more year of our mandate, to focus on their current missions,” he added. “There is still much we can do to make the French economy more competitive and to support French businesses based both here and abroad.”
