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French economy stabilising, but manufacturing hits new low

French economy stabilising, but manufacturing hits new low

The troubled French economy is showing signs after stabilising with its August purchasing managers' index (PMI) reading rising to 50, ending a three month period of contraction.

Markit's flash composite PMI released this morning revealed it rose from 49.4 in July, based on the first three weeks of the month. The news is a rare chink of light in the slowing eurozone, after French GDP came in flat in the second quarter.

However, the PMI data did reveal a divergence in the performance of different sectors. While the services activity index rose from 50.4 in July to 51.1, marking a five month high, manufacturing contracted further, slipping from 47.8 to 46.5, to reach a 15 month low.

Elsewhere, new business at private sector firms in the services sector rose for the first time since March, but manufacturers recorded the steepest decline in orders for 16 months with both the domestic export markets proving weak.

Jack Kennedy, senior economist at Markit, said: 'Modest expansion in France’s dominant service sector masked ongoing weakness in manufacturing during August.

'Overall, the data point to quarterly GDP tracking around stagnation in the third quarter, In conjunction with continuing the flat trend seen since the turn of the

year.

'An acceleration in the rate of job cutting combined with ebbing business confidence in the service sector during August offers little to suggest that the

economy is set to snap out of its sluggish performance any time soon.'   

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