Economic activity is marking time in France

2023-09-05 10:31:00

It’s confirmed. In August, French economic activity contracted once once more, according to the composite PMI index published on Tuesday 5 September by S&P Global and the Hamburg Commercial Bank (HCBO). This index, which compares the volume of activity to that of the previous month, stood at 46 in August, once morest 46.6 in July. This is its third consecutive decline.

Note that the index has been revised downwards following an initial estimate published at the end of August at 46.6. As a reminder, a value below 50 signals a contraction in activity, and a value above an expansion.

Economic activity contracts in France for the third month in a row

Penalized by weak demand, the volume of new business therefore fell in August. He mostly recorded “its strongest monthly decline for 33 months”, S&P said in a statement.

Services are marking time in France…

The composite index, which combines services and the manufacturing sector, also fell slightly to settle at 46.0, once morest an initial estimate of 46.6 points and 46.6 points in July.

In detail, in services, the contraction in activity accelerated to reach its pace “most marked” since February 2021, going from 47.1 in July to 46 in August.

“The French services sector remains under pressure in August, under pressure from a third consecutive month of declining activity, coupled with a decline in new orders, both globally and abroad”, notes Norman Liebke, economist at the Hamburg Commercial Bank. “Companies surveyed primarily cite tight customer budgets and general caution regarding the economic outlook.”

As for the indicator measuring manufacturing activity, already published on 1 September, it stood at 46 in August, once morest 45.1 in July. That is the seventh consecutive month of contraction.

What is the contribution of the manufacturing sector to the modern economy?

…just like with our European neighbors

In Germany, service sector activity contracted in August for the first time this year. The services sector PMI fell to 47.3 in August from 52.3 in July, in line with early estimates, according to the final results of the HCOB monthly survey also released on Tuesday. Businesses reported a sustained weakening of demand amid economic uncertainty and strong inflationary pressures.

“Something strange is happening in the German service sector: activity is slowing down, but prices are rising”, notes Cyrus de la Rubia, chief economist at the Hamburg Commercial Bank.

According to the expert, the explanation probably lies in the strong wage increases, which weigh on activities dependent on the workforce.

Germany in search of solutions to emerge from recession in 2023

Across the Channel too, activity in the service sector contracted in August for the first time since January. The reason ? Rising interest rates reduced consumer and business demand, although the decline was less than originally estimated, according to the monthly S&P Global Survey of Purchasing Managers. The index for the British services sector thus fell to 49.5 in August, once morest 51.5 in July (the initial estimate was 48.7).

The shadow of recession hangs over the eurozone

More generally, across the euro zone as a whole, the services index fell in August from 50.9 to 47.9. Either a level lower than the “flash” estimate at 48.3. Consumers have borne the brunt of the consequences of rising rates and the high cost of living.

This contraction led to a greater than expected slowdown in economic activity in the euro zone in August, according to surveys of purchasing managers. The composite PMI thus stands at 46.7 for August – a nine-month low – once morest 48.6 for July. A first estimate had given it at 47.0.

“The euro zone did not enter a recession in the first half, but the second half will be more difficult”, Selon Cyrus de la Rubia. “The disappointing indicators contributed to a downward revision of our GDP forecast, which now stands at -0.1% for the third quarter”.

Euro zone: halted in its slowdown, inflation remained stable in August at 5.3% year on year

“The growth momentum is running out of steam” in France, warns the boss of bosses

The president of Medef, Patrick Martin, agreed on Tuesday that “in a good number of cases the situation is turning around” in France, a phenomenon “flagrant in the building”, he estimated on France Info.

“The growth momentum is running out of steam in a global panorama that is running out of steam itself”, due to rising interest rates. “It shouldn’t take too long,” said Patrick Martin.

(with agencies)