French economic activity contracted in August for the third consecutive month, according to the provisional PMI index published on Wednesday by the S&P Global agency. The Flash composite index, which measures private sector activity, stood at 46.6 in August, the same level as in July, and a low point since November 2020.
Activity in the services sector, the dominant sector of the French economy, fell for the third month in a row, to a 30-month low of 46.7 (vs. 47.1 in July). The decline in manufacturing output, which began last summer, continued, with the provisional PMI at 45.8. In this sector, however, the contraction is less than in July (44, revised slightly upwards), and it is a five-month high. A value above 50 means expansion, while a value below this threshold means contraction.
Worrying drop in demand
S&P Global also notes “a further fall in demand in both sectors”, with contraction rates higher than in July. Businesses, however, increased their workforce in August, but with job creation at the lowest level since January 2021. Businesses surveyed also indicated a slowdown in price growth in August, with inflation rates of prices paid and prices invoiced at the lowest for twenty-nine and twenty-eight months respectively.
“Stuck in a rut, the French economy, the second largest economy in the euro zone, is once again facing major difficulties in the middle of the third quarter,” observed Norman Liebke, economist at Hamburg Commercial Bank, which publishes the index with S&P Global. “Contrary to all expectations, and despite hopes of an improvement in the economy, the latest survey results suggest a possible contraction in GDP in the third quarter,” he said. Business confidence that business will grow over the next 12 months also weakened in August, while still holding above the 32-month low recorded in June.