France May flash services PMI 49.4 vs 51.7 expected

• Prior 51.3
• Manufacturing PMI 46.7 vs 45.8 expected
• Prior 45.3
• Composite PMI 49.1 vs 51.0 expected
• Prior 50.5

Ouch. Not quite was planned as this is at bit of a setback for the ECB. The French services sector and overall business activity are seen contracting in April, albeit very marginally. Demand conditions picked up, reflecting a first gain since April last year, although mildly. But that still isn’t enough to help offset the decline in activity on the month. HCOB notes that:

“The French economy will grow in the second quarter thanks to strong domestic demand. Although the HCOB Composite
Output PMI fell slightly below 50 in May, there is no reason for any major concern. Demand has grown for the first time in
over a year and employment is still growing robustly. Our HCOB Nowcast expects 0.3% economic growth for the second
quarter. While this is strong compared to the last few quarters, it is still slightly below the previous estimate due to the worsethan-expected HCOB PMI figures, down from 0.4%.

“The French services sector is showing signs of a sustainable upward trend. The sub-index of new business is confirming
this, showcasing stronger overall demand. Although business activity declined, it did only slightly and at a considerably
softer pace when compared to the past months. Moreover, although slowing, employment continues to grow at a solid pace.

“France’s manufacturing sector is slowly making a comeback. Although the HCOB Manufacturing PMI and the Output PMI
are both still below 50, they recovered clearly since their low in December last year. The amelioration of French
manufacturing comes also with higher price pressures. Output prices increased for the first time since May 2023.

“The global environment is heavily impacting the French economy. For now, input price increases stay elevated due to
higher wages, but higher energy prices are also at play. They pose a serious risk, with the ongoing middle east crisis in
mind. Moreover, although global trade seems to be recovering gradually, France does not seem to be profiting proportionally
as foreign demand turned even weaker this month.”

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