The recovery in France's private sector slowed much more sharply than expected in June as global economic uncertainty weighed on demand, according to a survey today which raised doubts over prospects for jobs and growth.
Markit/CDAF's flash composite purchasing managers index (PMI), which measures the pace of change in business activity in both services and manufacturing, fell to 55.4 in June from 60.3 in May, reflecting the slowest pace of growth since October.
In services, the flash headline index slumped to 56.7 from 62.5 in May, falling to the lowest level in six months.
Growth in manufacturing hit a 22-month low as the flash PMI fell to 52.5 from 54.9 a month earlier and missing a forecast for 54.3.
Both sectors were hit by fall-offs in output and new order inflows, which appeared to show France's economic recovery may have peaked in the first half of the year and is now moving into a more sluggish phase consistent with the rise in global economic risks.
New orders in manufacturing in particular grew at their slowest pace since August 2009, a time when the euro zone's second-largest economy was only just emerging from its worst recession in post-war history.
"For Q2 as a whole we might see some good numbers coming through. But they need to be treated with a great degree of caution because of the loss of momentum we've seen during the period," said Markit's chief economist Chris Williamson.
France surprised economists in the first quarter of 2011 with stronger-than-expected growth of 1 percent, after a more muted 0.3 per cent expansion in the final quarter of 2010. But two main downside risks have emerged since then, both of which are fuelling doubts over the outlook in the months ahead.
Fears have grown of a default in Greece that could have dramatic repercussions for other countries in the euro zone and potentially trigger a second financial crisis.
Meanwhile, the outlook for the US economy has darkened, raising the threat of a slump in global demand.
In France, recent data has shown consumers have been reigning in spending amid the uncertainty, in a worrying sign for the economy. And June's PMI survey showed that slowing demand has started to undermine employment prospects which could in turn exacerbate the downward trend in consumption.
The flash composite employment sub-index fell to 51.4 in June from 52.3 in May, hit by a slump in hiring in the services sector where firms created jobs at the slowest pace since April last year.
The government is still forecasting economic growth of 2 per cent this year, and has pinned its deficit-reduction targets on that figure.
But Markit warned that if PMI data remained at June levels, growth could disappoint. "It needs to pick up to get any sort of decent rate of growth," said Mr Williamson.
Reuters
