France June flash services PMI 48.0 vs 52.0 expected

• Prior 52.5
• Manufacturing PMI 45.5 vs 45.4 expected
• Prior 45.7
• Composite PMI 47.3 vs 51.0 expected
• Prior 51.2

Ouch. That is a painful reading on the services front, falling to a 28-month low and is a big blow to the euro and the ECB's conviction to tighten further. The manufacturing print is also a 37-month low as the deterioration in demand conditions is starting to weigh further on the French economy. HCOB notes that:

“The HCOB Flash PMIs for June do not paint an encouraging picture for the French economy, as was the case in recent months. With a value of 47.3, the HCOB Composite PMI is the lowest it has been since the beginning of 2021. Moreover, the index fell considerably compared with the previous month, with a drop of around four points. The services sector is mainly responsible for this decline. The companies surveyed indicated a renewed drop in activity, citing inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term and challenging financial conditions as reasons that led to lower business activity.

“Service sector companies lamented declining new orders at home and abroad, alongside falling backlogs of work. Although business expectations for the coming twelve months remain above the 50 mark, the corresponding HCOB PMI has fallen by more than six points and may indicate that the services sector will come under further pressure in the coming months.

“Prior to the June reading, our nowcast model had signalled economic growth of 0% QoQ for the second quarter, with manufacturing contracting and services expanding. With the new June figures of the HCOB PMIs, the picture changes, now not only the manufacturing sector but also the services economy is expected to contract, and economic growth turns negative overall along with it. According to our model, this results in negative growth of -0.5% QoQ. Even though this alone does not yet represent a recession, speculation that one will occur is likely to increase.

“On the price front, fundamentally encouraging signals are being sent, and these are coming primarily from the manufacturing sector. After the HCOB PMI for input prices in May signalled a decline in costs for the first time since July 2020, the corresponding PMI for sales prices now follows in June. In the services sector, on the other hand, while we have yet to see any price declines, the pace of price increases continues to slow. Although it is encouraging that price momentum is declining, we fear that service inflation will initially decline due to statistical base effects, but will ultimately remain persistent, thus also affecting core inflation significantly.”