World Economy

French Manufacturing PMI Near 6-Year High

Manufacturers’ optimism about future output has hit a record high.Manufacturers’ optimism about future output has hit a record high.

French manufacturing activity held close to a six-year high in July as political uncertainty dissipated after the presidential election, a survey showed on Tuesday.

Data compiler IHS Markit said its final purchasing managers’ index rose marginally to 54.9 from 54.8 in June, just shy of a six-year high reached in April, Reuters reported.

Business and consumer confidence surveys soared in the run-up to Emmanuel Macron’s election as president in May on a pro-business, reformist platform. They have since eased off their peaks but remain high.

The PMI reading for manufacturing was lower than a preliminary estimate of 55.4 but well above the 50-point line dividing expansions in activity from contractions.

Though growth in new orders eased slightly, manufacturers’ optimism about future output hit a record high and they took on staff at the fastest pace in nearly 17 years.

“The upturn in business confidence has coincided with a rebound in economic conditions in the eurozone and, more recently, reduced political uncertainty following the conclusion to the French presidential and legislative elections, and looks set to support manufacturing growth in the coming months,” IHS Markit economist Alex Gill said.

French Prime Minister Edouard Philippe recently unveiled an ambitious program of tax cuts and reduced public spending designed to boost investment and end the country’s reliance on state borrowing.

Philippe put spurring entrepreneurship at the heart of his first policy speech to the National Assembly after presidential and parliamentary elections in May and June.

The government sailed through a vote of confidence held afterwards, with 370 MPs in the lower house backing it and 67 opposed. There were 129 abstentions.

“Businesses must want to set up and develop on our territory rather than elsewhere,” Philippe told the lawmakers, announcing that corporate tax would be cut from 33% to 25% in the next five years.

Tackling France’s “addiction to public spending” was a priority, he said, warning that the public debt now totalled €2.1 trillion ($2.48 trillion), nearly the equivalent of an entire year’s economic output.

“We are dancing on a volcano that is rumbling ever louder,” Philippe told the newly elected lower house.

He announced plans to cut public spending—currently 56% of GDP, one of the EU’s highest levels—by three points and bring the budget deficit in line with an EU limit of 3% of GDP this year for the first time in a decade.

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