Pickup in French manufacturing offers hope as services sector still weak -flash PMI

PARIS (Reuters) – Output in the French economy fell slightly overall again in January, a purchasing managers’ survey showed on Tuesday, but manufacturing activity improved for the first time since August.

A decline in activity in the country’s dominant services sector continued to drag down the overall picture, according to S&P Global’s flash composite purchasing managers’ index (PMI) for January, which slipped to 49.0 points, from 49.1 in December.

Any figure above 50.0 indicates an expansion in activity, while below that suggests a contraction.

“The downturn remains demand-driven, and overall new business inflows fell again in January,” said Joe Hayes, senior economist at S&P Global, adding: “In addition to persistent high inflation, (…), rising euro zone interest rates present another drag to demand as borrowing costs increase.”

However, the flash PMI for French manufacturing rose to 50.8 points in January, from 49.2 last month and beat a Reuters forecast for 49.6.

The services sector flash PMI came in at 49.2 points, a 22-month low and down from 49.5 the previous month. Analysts had forecast a reading of 49.8.

“The decline in activity was once again fairly restrained and most certainly not of the nature many had expected prior to this winter,” said Hayes.

Sustained employment growth and brightening business confidence, as well as signs cost inflation was easing, were positive signs for the French economy, S&P Global said.

(Reporting by Tassilo Hummel; Editing by Susan Fenton)