France: Private sector activity contracts at a softer rate in May
The seasonally-adjusted IHS Markit Flash Composite Purchasing Managers’ Index (PMI) rose to 32.1 in May, after April’s 11.1 reading, which had marked an all-time low in the 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, particularly among manufacturers, 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. 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:
“Following April’s record decline, the latest PMI data pointed to a further contraction in French private sector business activity during May. Given the low likelihood of businesses being open in April but closed in May, the latest reduction in output reflects the deteriorating demand conditions that firms now face. “That said, rates of activity decline at both manufacturers and service providers did ease in May, and we should expect this trend to continue as more and more firms reopen for business. Although we might see further contractions while demand remains subdued, PMI figures should continue to climb in the months ahead barring a second outbreak.”