France: Private sector activity declines in September
September 23, 2020
The seasonally-adjusted IHS Markit Flash Composite Purchasing Managers’ Index (PMI) dropped to 48.5 in September, from 51.6 in August, marking the lowest reading since May. Consequently, the index fell below the 50-threshold that separates contraction from expansion in business conditions, hinting at a stuttering recovery.
September’s downturn was chiefly driven by a marked decline in activity in the services sector, due to a decrease in new orders amid weak international demand. Activity in the manufacturing sector, however, picked up pace compared to the previous month. Meanwhile, employment fell in both sectors in September, largely owing to the recent spike in new Covid-19 cases as firms put off hiring due to concerns of a second lockdown period. The rate of job shedding slowed from August, however. On the price front, input costs continued to rise in September amid higher prices for raw materials, albeit at a slower rate than in the previous month. On the other hand, output charges fell at the quickest clip in four months as firms cut charges in a bid to raise business. Lastly, businesses grew more optimistic regarding the 12-month outlook, largely on improved demand expectations.
Commenting on the reading, Eliot Kerr, economist at IHS Markit, noted:
“The sharp rise in COVID-19 cases recorded across France during September helped to explain the first fall in business activity since May. August data had already pointed to a slowdown in the recovery but now the path towards pre-coronavirus levels of activity has gone into reverse. The rise in case numbers has been accompanied by fresh restrictions, but has also caused hesitancy among businesses due to fears of a second round of temporary business closures.”
Author: Hanna Andersson, Economist