French Private Sector Downturn Deepens

(RTTNews) - France's private sector output declined further in June as manufacturers joined services providers in the contraction territory, flash survey results from S&P Global showed on Monday.

The HCOB flash composite output index declined to 48.5 in June from 49.3 in the previous month. A reading below 50.0 indicates contraction.

Although the fall was moderate, it took the current sequence of reduction to ten months.

The service economy was the main source of private sector weakness in the last two months. In June, the manufacturing industry slipped back into contraction by recording its fastest drop since February.

The services Purchasing Managers' Index registered 48.7 in June, down from 48.9 in the prior month. The score was forecast to rise to 49.2.

The manufacturing PMI slid unexpectedly to a four-month of 47.8 from 49.8 a month ago. The score was seen unchanged at 49.8.

The survey showed deterioration in demand for goods and services. Job cuts were also recorded, as outstanding business volumes decreased in June.

The rate of input cost inflation was broadly similar to May, while selling prices rose only marginally due to a lack of sales.

Nonetheless, there was a rebound in business confidence from May's recent low to an eight-month high.

"This is a little setback. Since the middle of the first quarter, the headline French HCOB PMI has risen significantly, which had sparked hopes for a recovery in the French private sector," Hamburg Commercial Bank Junior Economist Jonas Feldhusen said.

"While the ECB's interest rate cuts, deregulation efforts at the EU level, and planned defence investments are likely to continue providing support to the manufacturing sector, uncertainties surrounding global trade and geopolitics - now further exacerbated by escalations in the Middle East - as well as global competition, are dampening the outlook," Feldhusen added.