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French Business Climate Slows

French Business Climate SlowsFrench Business Climate Slows

French business activity slowed more than expected in May, shifting down to its slowest pace in nearly a year and a half as a string of public holidays weighed on the service sector, a monthly survey showed.

Data compiler IHS Markit said its composite Purchasing Managers’ Index, which covers the services and manufacturing sectors, fell to 54.5 points from 56.9 in April, hitting its lowest level since January 2017.

The drop also exceeded economists’ expectations for a meager decline to 56.6 in a Reuters poll and brought the index closer to the 50-point line dividing an expansion in activity from a contraction.

Four public holidays spread over three weeks in May gave workers ample opportunity to squeeze in extra days off, disrupting business activity.

IHS Markit chief economist Chris Williamson said the impact could be most clearly seen in the services sector and suggested that the broader economy was holding up better than indicated by the May survey.

“There have been short-term disruptive factors and companies are fairly upbeat about what the year holds for them. So we remain positive about the outlook,” Williamson told Reuters.

He said France could see quarterly growth of 0.4% in the April-June period after the economy grew 0.3% in the first three months of the year.

The PMI for the dominant service sector dropped to a 16-month low of 54.3 in May from 57.4 in April, smashing economists’ expectations on average for an increase to 57.2.

In manufacturing, though, the PMI rose to 55.1 from 53.8 in April, beating economists’ expectations on average for a marginal decline to 53.7.

Manufacturers saw the flow of new orders improve and stepped up their pace of hiring to work off growing backlogs of work, which bodes well for the months ahead.

 

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