French Private Sector Output Falls at Slower Pace in August

August 28, 2012 /

Latest Flash PMI data signalled a reduction in French private sector output for the sixth consecutive month in August. However, the rate of contraction eased to only a modest pace.

The Markit Flash France Composite Output Index, based on around 85% of normal monthly survey replies, recorded 48.9, up from 47.9 in July. Service sector business activity was broadly stable in August for the second month running.

Manufacturers meanwhile reported the slowest fall in output since April. The weaker drop in activity reflected a moderation in the rate of contraction of new business during August. The latest fall in new work was the least marked in five months, reflecting a considerably slower drop in manufacturers’ new orders.

Service providers signalled a slightly faster reduction in new business than one month previously. Outstanding business in the French private sector similarly decreased at a slower rate during August.

The rate of decline in backlogs across the French private sector eased to the weakest in five months. Composite data showed that job losses continued in August, with the rate of decline unchanged from July. A faster reduction in service sector employment was offset by a weaker fall in manufacturing staffing levels.

Lower payroll numbers were attributed by survey respondents to a combination of declining activity and cost-cutting. Input prices in the French private sector increased during August following a slight fall in July. That said, the rate of inflation was only modest. Cost increases were centred on the service sector, where there were reports of higher fuel prices and staff salaries.

In contrast, output prices declined for a fourth successive month. Discounting in the service sector offset a modest rise in manufacturers’ selling prices.

French service providers reported an improvement in their future expectations for activity during August. Although still well below its long-run average, sentiment rose to the highest level in three months, with a number of panellists commenting on the scheduled start of work on new projects and ongoing business expansion plans.

Jack Kennedy, Senior Economist at Markit and author of the Flash France PMI, said: “August’s flash PMI data signal a further drop in private sector output, although the pace of decline moderated slightly as the manufacturing downturn eased and services held its ground. While France just avoided a fall in GDP during Q2 according to the first official estimate, PMI data currently suggest contraction is on the cards for Q3. Moreover, the continued declines in employment shown by the latest flash PMI data point to rising jobless levels, which would further weaken demand.”

 

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