French business activity expanding in August: PMI

Daniel Fowler
August 23, 2019

Market consensus was 46.2 points.

Robust growth of service sector business activity kept the headline index above the 50.0 no-change mark, although it was a slower (but still marked) decrease in manufacturing output that was behind the slightly improved reading.

Meanwhile, services purchasing managers index rose to 53.4 from 53.2 in July. Analysts also say the tit-for-tat tariffs between the US and China are also having an impact. Economists had forecast a score of 51.2. A reading above 50 points indicates an expansion, and the long-term trend appears to be heading towards stagnation. This was lower than a final July figure of 51.7.

"While the rate of overall expansion ticked up, we're still looking at GDP only rising by between 0.1 percent and 0.2 percent, based on the PMI data for the third quarter so far", Andrew Harker, an associate director at IHS Markit, said.

On an unexpected improvement in the German PMI numbers, the buying interest around the EUR picked up pace, sending the EUR/USD pair back above the 1.11 handle.

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Many worldwide companies have relocated their production to countries such as Vietnam and Mexico to avoid the USA tariffs. Gao repeated a Chinese threat of unspecified "corresponding countermeasures" if Trump's tariff hike goes ahead.

Factory activity contracted for the seventh month in a row, although at a slower rate than the previous month, with the related index rising to 47.0 from 46.5 in July, beating the 46.2 forecast in a Reuters poll.

"The lack of a quick rebound from the recent economic slowdown has impacted firms' confidence, with sentiment the lowest in over six years".

"The most concerning aspect of the latest data is a slowdown in new business growth to its weakest in a decade, driven by a sharp loss of momentum across the service sector", Moore said.

German manufacturing activity remained in contraction, but unexpectedly reached a two-month high in August, the latest manufacturing activity report from IHS/Markit research showed this Wednesday.

- Detailed PMI data are only available under license from IHS Markit and customers need to apply for a license.

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