France: Flash composite PMI modestly declines in July
July 24, 2018
The IHS Markit flash composite Purchasing Managers’ Index (PMI) dropped from 55.0 in June to 54.5 in July. Despite the drop, the indicator remained above the 50-point threshold that separates expansion from contraction in business activity in the service and manufacturing sectors, and the rate of expansion in July exceeded the long-run series average of 53.9 points.
July’s decline largely reflected slower growth in services. Services expanded for the 25th consecutive month on the back of a higher volume of new orders, but the rate of expansion moderated from last month. Manufacturing output picked up from June’s over one-year low but nonetheless remained subdued. The service sector faced capacity constraints, with backlogs of work increasing due to high client demand; firms hired additional staff to keep up with excess demand. In turn, backlogs of work declined in manufacturing for the first time since June 2016. Regarding price developments, output prices rose as firms passed on higher costs for inputs to clients.
Commenting on the July figure, Alex Gill, Economist at IHS Markit, said:
“The rate of job creation and degree of business confidence remained strong at both manufacturers and service providers, suggesting the French private sector is poised for further solid near-term growth.”
France Fixed Investment Forecast
FocusEconomics Consensus Forecast panelists see fixed investment growing 3.0% in 2018, which is up 0.2 percentage points from last month’s estimate. For 2019, the panel sees fixed investment expanding 2.6%.