French Manufacturing Output Contracts at Slower Pace in August

September 04, 2012 /

The downturn in France’s manufacturing sector eased during August based on manufacturing performance indicator Purchasing Managers’ Index (PMI).

France PMI posted 46.0, up from 43.4 in July. The latest reading was the highest since April, albeit still indicative of a marked pace of deterioration in overall operating conditions.

A key contributor to the rise in the PMI was a slower decline in the volume of new orders received by French manufacturers during August. Although still substantial, the latest fall in new work was the weakest since February. Data suggested that soft domestic demand remained the principal factor weighing on new orders, as export sales decreased only modestly and at the slowest rate in four months.

The trend in new orders was mirrored by an easing in the pace of contraction of output. The latest drop in production was sharp, but slower than the 39-month record seen in July.

Weaker declines were also signalled in both backlogs of work and employment during August. In the case of the latter, the latest reduction was the least marked since April. Similarly, the rate of contraction in stocks of finished goods eased, reaching its slowest since May.

Stocks of purchases, in contrast, decreased at an accelerated pace in August. The latest reduction in pre-production inventories was the sharpest in three years, and extended the current period of decline to 15 months.

Contributing to the fall in stocks of purchases was a reduction in the amount of raw materials and semimanufactured goods acquired by French manufacturers during August. The rate of decline remained marked, despite easing to the slowest in four months.

With purchase quantities continuing to fall, suppliers were able to deliver items faster on average. Vendor lead times shortened for a fourth consecutive month, albeit only marginally.

Purchasing costs decreased further in August, falling for the third month running. That said, the latest drop in input costs was the slowest in this sequence. There were some reports that lower prices had been agreed following successful negotiations with suppliers.

Prices charged by French manufacturers for finished goods meanwhile showed little-change during August, continuing the recent broadly flat trend.

Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI, said: “Although the downturn in the French manufacturing sector eased in August, output continued to contract at a sharp rate. Again it was weak domestic demand primarily responsible for dragging new orders lower. With employment also
continuing to decline, there is little to be too positive about in the latest survey data bar perhaps
manufacturers managing to restore their margins a touch by holding output prices steady at a time of
falling input costs.”

 

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