France: Private sector activity contracts at a softer rate in May
May 21, 2020
The seasonally-adjusted IHS Markit Flash Composite Purchasing Managers’ Index (PMI) rose to 30.5 in May, after April’s 11.1 result, which had marked an all-time low in 22 years of data collection. Nevertheless, the index remained below the 50-threshold that separates contraction from expansion in business conditions.
May’s improvement reflected a softer decrease in output in both the manufacturing and service sectors as some businesses began to reopen. Although new orders fell for the third month in a row, they did so at a softer rate than in April. Nevertheless, the backdrop remained bleak leading firms to reduce workforce numbers, with manufacturers cutting employment at a faster rate than service providers. Meanwhile, both input and output prices fell further in May. Lastly, the degree of negativity regarding the one-year outlook eased among French businesses.
In view of March’s developments, Eliot Kerr, Economist at IHS Markit, noted:
“As anticipated, the latest France Flash PMI results pointed to a much slower contraction in business activity during May, with some companies reopening as lockdown measures are cautiously pared back. However, despite some firms beginning to resume operations, the private sector as a whole posted another sharp decline in activity, falling further from an already low base set in April. The data highlights the difficulties economies may face in the recovery from this crisis, as firms continue to lay-off workers amid a persistently uncertain outlook.”
Author: Nicolás J. Aguilar, Economist