French PMI Tops Forecasts in October

France’s business rebound showed no sign of slowing in October as activity rose more than expected on the back of firm client demand, a monthly survey showed on Tuesday.

Data compiler IHS Markit said its preliminary composite Purchasing Managers’ Index gained further momentum, rising to 57.5 from 57.1 in September, Reuters reported.

The reading, the strongest since May 2011, exceeded economists’ average forecast for 57.0 and marked the 15th month in a row above the 50-point threshold separating expansion from contraction.

With the flow of new business holding firm, companies increased headcount at the fastest pace in over a decade to cope with growing backlogs. “Further encouragement was provided by the broad-based nature of the expansion, with output growth accelerating in both the manufacturing and service sectors, each underpinned by solid client demand,” IHS Markit economist Alex Gill said.

The dominant service sector saw its index reach a seven-month high of 57.4, up from 57.0 in September and beating the average forecast for 56.9.

Meanwhile, in manufacturing, the index rose to 56.7 from 56.1 in September, topping the average forecast for 56.0 and hitting the highest level in over eleven years. With demand strong, firms were more comfortable raising their prices, boosting inflation to just shy of a nearly six-year high reached in April.

The strong survey adds further evidence that President Emmanuel Macron’s reform agenda, and in particular a labor reform last month, is buoying business confidence and supporting job creation.

“Headline business sentiment in France remains robust,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics. “The continuing rise in firms’ expectations for production in manufacturing as a whole is particularly noteworthy. It suggests that managers have bought into the pledge by the new president to revive the economy.”