French Private Sector Output Remains Robust

French private sector activity expanded for an eleventh consecutive month in May, boosting the economic outlook of the eurozone’s second largest economy, according to data released on Tuesday.

Preliminary reading of the Markit services purchasing managers’ index rose to a six-year high of 58.0 this month from 56.7 in April. Economists had forecast a reading of 56.5, Investing.com reported.

The manufacturing PMI eased slightly, ticking down to 55.8, compared to expectations for 55.2 and from 55.1 a month earlier. The composite output index, which measures the combined output of both the manufacturing and service sectors rose to 57.6, the highest level in six years from 56.6 in April, beating expectations for 56.7.

A reading above 50.0 on the index indicates industry expansion, below indicates contraction.

“The latest PMI data points to further strong growth momentum in the French private sector, with the expansion quickening to a six-year peak,” Alex Gill, economist at survey compiler Markit said.

“The numbers continue to paint a positive picture of the French private sector economy.”

 Labor Law

President Emmanuel Macron begins work on Tuesday on what may be one of the defining issues of his presidency: simplifying France’s labor code, Bloomberg reported.

On his 10th day in office, Macron and Labor Minister Muriel Penicaud are starting a round of meetings with France’s unions and business organizations to see if there’s any common ground for distilling the country’s byzantine labor rules and letting individual companies negotiate wages rather than being subject to industry-wide agreements. The draft text of any new law isn’t expected until after legislative elections in June.

The issue has frustrated French presidents for at least two decades as the country’s powerful unions opposed efforts to reduce job protection for their members. Yet Macron has signaled that shifting the French labor market onto a more flexible footing will be central to his strategy for boosting growth, keeping populism in check in the long term and winning the trust of the German government in shorter order.

France needs to “improve the access to the labor market for job seekers, notably the less qualified workers and people with a migrant background,” the European Commission said Monday in its annual economic-policy recommendations. The government should “further reduce the regulatory burden for firms,” it added.