France: Private sector activity declines at softest rate in three months in March
March 24, 2021
The seasonally-adjusted IHS Markit Flash Composite Purchasing Managers’ Index (PMI) rose to 49.5 in March, from February’s 47.0, marking the best result in three months. That said, the index still remained below the 50-threshold that separates contraction from expansion in business conditions as Covid-19 restrictions continued to hinder activity.
March’s improvement largely reflected a more moderate decline in overall business activity amid a stabilization in new orders. The contraction in the services sector was the softest this year so far, while output in the manufacturing sector grew at the fastest pace since January 2018. Meanwhile, firms in both sectors took on additional staff in March, with the rate of job creation the fastest in nearly two-and-a-half years. On the price front, input cost inflation hit at near two-year high in the last month of Q1, largely driven by surging costs in the manufacturing sector—where input costs rose at the fastest clip since May 2011. Moreover, output charges increased at the quickest pace in 17 months in March. Lastly, confidence regarding the twelve -month outlook remained strong—albeit easing somewhat from the previous month—amid hopes of improved demand dynamics once restrictions are relaxed.
Commenting on risks the outlook, Eliot Kerr, economist at IHS Markit, noted:
“The threat of setbacks to the reopening of the economy remains tangible. The recent re-introduction of lockdown restrictions in Paris serves as a reminder that the road to recovery may still be a bumpy one.”
Author: Hanna Andersson, Economist