French business activity grows at slowest pace in four months in May

PARIS (Reuters) – French business activity expanded at is slowest pace in four months in May, a survey showed on Tuesday, as manufacturing continued to contract and growth in the dominant services sector decelerated.

The HCOB Purchasing Managers Index (PMI) flash reading for France’s services sector in May, compiled by S&P Global (NYSE:), stood at 52.8 points, down from 54.6 in April and lagging forecasts for a reading of 54.0 points.

Any figure above 50 points marks an expansion in activity, while a reading below 50 signals a contraction.

The HCOB flash PMI for manufacturing showed a decline in activity but fared slightly better than expected, rising to 46.1 in May from 45.6 in April and outperforming forecasts for a reading of 46.0 points.

The flash reading for the May composite PMI – which comprises both the services and manufacturing sectors – fell to 51.4 points, its lowest level since a January reading of 49.0, and down from 52.4 points in April.

It was also below a forecast of 52.0 points.

“Services sector activity increased for the fourth month according to the flash HCOB Services Business Activity PMI, driving economic growth in France. Despite this encouraging news, there is also some negative news that colours the picture somewhat more bleakly,” said Hamburg Commercial Bank (HCOB) economist Norman Liebke.

“Firstly, total new business fell for the first time in three months, and secondly, both input and output price inflation rates remain at high levels,” Liebke said.

He added that the services sector, which accounts for 80% of the euro zone’s second-biggest economy, would be the “driving force” in the second quarter.

France’s economy grew 0.2% in the first quarter, helped by household consumption and despite a series of strikes against the government’s pension reform bill.

Earlier this month, the Bank of France said the country’s GDP was set to grow slightly in the second quarter when compared to the previous one as activity across sectors was picking up steam.