Will growth weaken at the end of 2022? In any case, a new indicator goes in this direction. The Flash PMI index published on Wednesday by the firm S&P Global measured that private sector activity contracted in November. The index, as a first estimate, was 48.8. A final estimate of private sector activity in November is due out in early December.
Still, this figure is alarming since an index below 50 signals a contraction in economic activity when it indicates growth when it is above 50. According to this first estimate, the month of November is therefore down d ‘1.4 points compared to the month of October which was displayed at 50.2.
First economic contraction since February 2021
In August 2022, the Flash PMI fell to 49.8 points as a first estimate but was finally revised upwards a few days later. If the final estimate for private sector activity also comes in below 50, it will be the economy’s first contraction since February 2021.
An index below 50, which joins the prospects of the Organization for Economic Trade and Development (OECD) of lower growth for France. If France saw its GDP rise by 6.8% in 2021, the OECD projects growth of 2.6% in 2022 and 0.6% in 2023. Alvaro Santos Pereira, economist at the OECD presented a scenario that “is not a global recession, but a sharp slowdown in the global economy in 2023, along with still high but declining inflation in many countries.”
The struggling service sector
It is the services sector that has so far kept the Flash PMI above 50 according to S&P Global. ” Although the French manufacturing sector has been in a contraction zone since the start of the second half of 2022, the continued expansion of the services sector had so far supported the growth of overall activity. “, indicates the economist of S&P Global Joe Hayes, quoted in the press release of the firm.
Unfortunately, ” however, this essential support for French economic growth seems to be coming to an end adds the economist. The services sector also fell in November according to the first estimates of the Flash PMI which show that this sector stood at 49.4 points, its lowest level for almost two years.
Why such a drop? According to S&P Global, which surveyed 750 industrial and service companies, “ the decrease in activity was mainly due to the decrease in demand ” client, ” some respondents also mentioned the climate of uncertainty and the lack of economic visibility “. A demand which is decreasing at a time when inflation stood at 7.1% in October over 1 year and should remain sustainable according to the OECD.
(With AFP)