- Prior 48.5
- Composite PMI 49.8 vs 49.8 prelim
- Prior 48.6
This reaffirms some stabilisation in the French services sector at least in August, though falling just shy of the growth threshold of 50.0. Demand conditions are still a little lethargic, so that's something to be wary about. But at least employment conditions are holding up, with August marking the first expansion to workforce numbers since November last year. HCOB notes that:
"The French private sector economy is edging closer to stabilization. The HCOB Composite PMI rose to 49.8 in August, only marginally in contraction territory. This marks the highest reading in a year. Improvements stemmed from both services and manufacturing, with rates of decline cooling in both sectors. Overall, these are encouraging developments, though they must be viewed with caution given the broader climate of uncertainty and economic weakness in France, which now also faces the prospect of another government crisis. Despite the positive directional signals, the economic situation remains fragile, and political instability could quickly undo these early signs of recovery.
"Conditions in the French services sector still remain subdued. Declines in business activity and order volumes slowed, but overall index levels remain historically low. Foreign orders have dropped significantly, with companies reporting a decline in international clientele numbers. Nevertheless, backlogs of work increased during the reporting month, attributed to a mix of staff shortages and delays on the customer side. Despite the weak economic environment, service providers resumed hiring in August after eight consecutive months of workforce reductions.
"Business expectations remained below the long-term average. At the time of the August PMI survey dates, it was not yet known that Prime Minister Bayrou would seek a vote of confidence in parliament on September 8 to push through an austerity budget. However, the prospect of continued political uncertainty is likely to weigh further on companies’ outlook.
"Price dynamics in the services sector have changed little and input costs and output prices continue to edge up slightly. Persistently moderate price developments suggest that cost pressures in the services sector are neither escalating sharply nor easing significantly, which can be interpreted as a sign of relative stabilization, but also of a lack of momentum on the demand side."
