French business activity firmer than expected in February: PMI

February 21, 2019

PARIS, Feb 21 (Reuters) – French business activity stabilized this month, improving more than expected as manufacturing growth helped offset slack in services that has dogged firms in the wake of anti-government protests, a monthly survey showed on Thursday.

Data compiler IHS Markit said its preliminary purchasing managers index rose to of 49.9 points from 48.2 in January, beating economists’ average forecast for 49.0 in a Reuters poll.

The improvement brought the index to a three-month high, but was just a hair below the 50-point threshold dividing an expansion in activity from a contraction.

Business confidence tanked at the end of last year in the face of the “yellow jacket” protests that saw some of the worst street violence in the capital in decades.

“Although the ‘gilets jaunes’ protests are still ongoing and panelists have suggested that these are still causing disruption, the economy showed resilience in the latest survey period,” IHS Markit economist Eliot Kerr said.

Firms stepped up the pace of hiring while the flow of new business declined only marginally after pulling back more sharply since November, the survey showed.

“That said, the economy will continue to post below its potential as long as social unrest continues,” Kerr said.

The index for the manufacturing sector rose to a five-month high of 51.4 from 51.2 in February against expectations for a dip to 51.0.

The sector saw its new order flow return to growth this month although foreign demand weakened. That came as firms pushed up prices at the fastest pace since November.

Meanwhile, the services index rose to a three-month high of 49.8 from 47.8 in January, easily beating economists’ expectations for an improvement to only 48.7.

A three-month decline in new business slowed this month and yet firms added to headcount even though they had to trim prices for the first time since August 2017.

(Reporting by Leigh Thomas; Editing by Hugh Lawson; leigh.thomas@thomsonreuters.com; +33 1 4949 5143)

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