- Prior 47.8
- Manufacturing PMI 44.9 vs 46.9 expected
- Prior 46.2
- Composite PMI 49.9 vs 48.8 expected
- Prior 48.3
The French economy nears stabilisation in April but it is a tale of two halves for the most part. While the services sector has returned to growth, the manufacturing sector is seen in deeper contraction territory on the month. But it is the first time in almost a year that services activity is seen expanding at least. HCOB notes that:
“The French economy is back on track. The Composite Flash PMI reached its highest level in 11 months, with 49.9 index
points taking it almost out of the contraction zone. The only reason for that surprisingly robust figure is the expansion of the
services sector, which experienced an increase in demand for the first time since April 2023. The manufacturing sector stays
put in decline due to a deceleration of activity. Overall, our HCOB nowcast model for the second quarter points to a recovery
of the French economy, driven by the services sector.
“The French services sector is the workhorse of the economy. Services activity grew for the first time since May 2023, when
large protests started to drive negative economic sentiment. The main reason for the expansion was higher demand.
Because demand was strong in April, backlogs of work declined at a slower pace compared to the previous month.
“French manufacturing output stays subdued, but we expect it will soon follow the path of the services sector. The
manufacturing sector delays the overall economy’s recovery for now, though. The Output Index dropped for another month,
mostly offsetting services activity growth. Weak demand in manufacturing was the main reason for the faster deterioration.
“Prices remain elevated due to higher wages, energy and oil prices. In particular, output price inflation reaccelerated in April,
staying clearly above 50. Input prices also reaccelerated compared to the previous month. The labour-intensive services
sector is mostly responsible for price pressures in France. Increases in wages and fuel prices were cited as the reasons for
services and goods inflation, respectively. According to the Indeed Wage Tracker, wage growth should slow further in the
coming months, appeasing monetary policymakers. We also believe that the recent resurgence in energy prices should calm
down somewhat in the medium term.”