France: Private sector activity rebounds in June on reopening hopes
July 3, 2020
The seasonally-adjusted IHS Markit Flash Composite Purchasing Managers’ Index (PMI) rose to 51.7 in June, after May’s 32.1. Therefore, the index rose above the 50-threshold that separates expansion from contraction in business conditions, after four months of steeply negative prints.
June’s increase came chiefly on the back of upbeat manufacturing production, which expanded at the fastest pace in more than two years. Meanwhile, service providers reported a marginal increase in output. On the downside, new orders fell again, indicating that despite easing restrictions demand has yet to pick up. Against this backdrop, both sectors continued to cut down their workforce numbers in June. Looking at the 12-month outlook, French businesses turned optimistic for the first time in four months on reopening expectations and the expected recovery that will ensue.
In view of June’s developments, Eliot Kerr, Economist at IHS Markit, noted:
“Following the easing of lockdown restrictions in May and early-June, businesses have had the opportunity to begin ramping up operations, and that was reflected by a renewed expansion in private sector activity at the end of the second quarter. Although the recovery was predominantly driven by manufacturers, service providers also posted an expansion in activity. That said, sub-sector data showed that services firms that are reliant on face-to-face interactions, such as Hotels & Restaurants, continued to suffer. Meanwhile, demand conditions deteriorated further, driven by a solid reduction in the service sector. However, the downward trajectory continued to flatten and if France can avoid a large scale second outbreak, we can expect new business to stabilise in the months ahead.”