Key findings:
HCOB Flash France Composite PMI Output Index at 2-month high. HCOB Flash France Services PMI Business Activity Index at 2-month high. HCOB Flash France Manufacturing PMI Output Index at 37-month high. HCOB Flash France Manufacturing PMI at 28-month high.Comment:
Commenting on the flash PMI data, Jonas Feldhusen, Junior Economist at Hamburg Commercial Bank, said:
“France’s private sector remained subdued in May. The Flash Composite PMI continues to signal contraction, reflecting the economic challenges France is facing amid domestic political instability and a fragile macroeconomic environment.
“Diverging trends emerged across sectors. The services sector deteriorated, with business activity still weak. Looking ahead, prospects are equally dim. The index measuring the order situation—an indicator of future business—remains well below the long-term average and inside contraction territory. In contrast, the manufacturing sector showed signs of recovery.
"The Manufacturing PMI improved for the fifth straight month, supported by increased factory output. Despite ongoing uncertainty and trade-related headwinds, several factors may explain this upward trend, such as the ECB’s easing of credit conditions, EU efforts to reduce regulatory burdens, and the push to increase defense spending. These developments could, despite prevailing risks, pave the way for a cyclical rebound following the prolonged downturn in the sector.
“Price dynamics raise new concerns for French businesses. While output prices slipped into deflationary territory in May, input cost inflation accelerated, signalling a squeeze on profit margins, particularly in the services sector. This raises the question of how trade frictions will influence European price levels in the coming months.
"On one hand, supply chain disruptions and frontloading could drive prices up. On the other hand, goods facing increased competition as a result of supply being redirected to the European market away from the US might exert downward pressure on prices. Nevertheless, HCOB Economics still expects three additional ECB rate cuts this year, as the subdued growth and inflation environment leaves scope for further easing.
“Despite improvements in manufacturing and President Macron’s recent efforts to position France as an attractive destination for investment, research and development, the overall outlook for the private sector remains bleak, as seen by the business outlook falling sharply in May, especially in the service sector.”
This article was written by Giuseppe Dellamotta at www.forexlive.com. Read More Details
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