France July flash services PMI 50.7 vs 49.8 expected

• Prior 49.6
• Manufacturing PMI 44.1 vs 45.8 expected
• Prior 45.4
• Composite PMI 49.5 vs 49.0 expected
• Prior 48.8

Both the services and composite readings are 3-month highs but the manufacturing reading is a 6-month low. That once again speaks to the contrast in the two sectors, not just for France but across the euro area as well. The good news at least is that services activity has returned to growth, albeit marginally. That likely owes in part to the Paris Olympics.

However, price pressures did intensify on the month and that will be something that could bite at the ECB’s plans to cut rates in September if the trend persists across the region. HCOB notes that:

“The Olympic Games are fuelling the French economy. Business activity increased for French service providers for the first
time in three months. According to anecdotal evidence, this is partially due to the Olympic Games. Additionally, companies
reported higher output due to the end of the election period, which led to more certainty.

“The French economy seems on track for a recovery in the second half of the year, a recovery led by the service sector, but
both input and output prices remain a challenge for the French economy as inflation rates accelerated. Higher raw material
prices drove up input prices and led to the fastest increase in selling prices over the last three months.

“The French economy is projected to grow by 0.3% in the third quarter, according to our HCOB GDP Nowcast, due to the
service sector expansion being signalled by the HCOB Flash PMIs. On the other hand, the industrial sector is expected to
fall by almost 1% compared to the previous quarter.

“Lower demand and higher input prices appear to have worsened French manufacturers’ outlook for the next 12 months.
The corresponding index for future output expectations dropped by almost three index points. Demand overall and from
abroad weakened due to delays from customers.”

This article was written by Justin Low at www.forexlive.com.