The French economy probably slumped in the three months through June, with purchasing manager indexes suggesting a 0.5% contraction from the previous quarter.
(Bloomberg) — The French economy probably slumped in the three months through June, with purchasing manager indexes suggesting a 0.5% contraction from the previous quarter.
“Prior to the June reading, our nowcast model had signaled economic growth of 0% for the second quarter, with manufacturing contracting and services expanding,” said Norman Liebke, an economist at Hamburg Commercial Bank. The new June figures change the picture as “now not only the manufacturing sector but also the services economy is expected to contract, and economic growth turns negative overall along with it.”
The flash composite PMI gauge for France dropped to 47.3 this month, falling below the 50 level that separates expansion and contraction for the first time since January and decreasing to a 28-month low. A sub-index for services saw a similar trajectory, while a measure for manufacturing decreased further into negative territory — where it has been since February.
“Even though this alone does not yet represent a recession, speculation that one will occur is likely to increase,” according to Liebke.
The data are a new setback for President Emmanuel Macron after credit ratings firms warned in recent weeks his government’s view of the economy could prove too optimistic even after France narrowly escaped a winter recession in the euro area and neighboring Germany.
Statistics agency Insee last week predicted 0.6% economic growth this year, below the government’s 1% target that it’s counting on to keep on track with a multi-year deficit reduction plan presented only two months ago.
PMI data later Friday for Germany and the euro area are predicted to show growth in services making up for sustained weakness in manufacturing.
Readings for the UK and the US are expected to show a slowdown. Data earlier revealed similar trends in Japan and Australia.
–With assistance from Mark Evans and Joel Rinneby.
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