- Prior 49.3
- Manufacturing PMI 45.3 vs 46.8 expected
- Prior 46.4
- Composite PMI 48.2 vs 49.5 expected
- Prior 48.9
The readings above are a further setback to the French economy after the softer ones in May already. A renewed downturn in new orders in particular is the main drag for the month. Meanwhile, employment conditions eased to a three-month low and there was also a decline in business confidence with the election outlook weighing. HCOB notes that:
“The French economy likely grew by 0.1% in the second quarter of 2024. At least that’s what our HCOB nowcast model suggests, with more pronounced growth in the service sector. Although the Composite PMI only crossed the threshold of 50 once this quarter, the index is still stronger compared to the first quarter of this year. However, the French economy seems to have weakened again in June with new orders coming in lower, especially from the services sector. For the third and fourth quarter, we expect a GDP boost from the Olympics taking place in July and August in France.
“The uncertainty of the upcoming elections has French businesses stalling and fearing tougher times. According to anecdotal evidence, some panel members linked lower activity levels to the upcoming elections. This was also seen in new orders, especially in the service sector, which declined for the first time in three months. In addition, output expectations for the coming twelve months have weakened, partially due to higher uncertainty about the upcoming election, but also due to higher geopolitical risks.
“Lower interest rates are already filtering through to the French economy. Some service companies reportedly lowered their output prices as a result of the decline in lending costs. Nonetheless, input price inflation remains at an elevated level and quickened for manufacturers due to higher raw material prices, including metals. Additionally, wages continue to pose a risk to service input price inflation, which could translate into higher output price inflation.
“France has not yet benefited from the global trade recovery. This is evident in the PMI for New Export Business, which has remained below the threshold of 50 for the twenty-eighth consecutive month. We anticipate the French economy to start participating and benefiting from the global trade recovery from the third quarter.”