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French private sector expanded

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Christian Fernsby ▼ | January 27, 2020
French private sector activity expanded at a weaker pace in January as a softer rise in services activity offset a mild pick-up in manufacturing production growth.
French factory
Business in France   The IHS Markit Flash France Composite Output Index was down
The IHS Markit Flash France Composite Output Index was down from 52.0 in December to 51.5 at the start of 2020, signalling the slowest rate of expansion since last September.

Topics: French private sector

Although service providers continued to outperform manufacturers, the former saw activity growth ease to the weakest in four months.

At the same time, factory output rose at a stronger, albeit still slight, pace than in December.

Aggregate new work intakes increased for the tenth month in succession, but the upturn moderated to the slowest since September 2019.

Growth in the service economy eased to an eight-month low, with a number of companies commenting on strike disruptions during January.

Meanwhile, goods producers registered a renewed rise in order book volumes.

Weak international demand acted as drag on order flows, with private sector firms signalling stagnant export business at the start of the year.

That said, there were divergences at the sector level, with a renewed increase in the manufacturing industry contrasting with the first decline for four months at services companies.

French companies foresee output expansion over the course of the coming 12 months, with the overall degree of optimism improving to a nine-month high.

Strengthening sentiment was recorded across both the manufacturing and service sectors.

Export opportunities to Asia, diversification, new partnerships and aggressive sales efforts were cited as potential drivers of growth.

A number of firms also hope for the end of strikes and reduced competition to support business activity.

Upbeat growth projections in turn underpinned job creation in the private sector.

The rate of employment expansion was moderate and matched that seen at the end of 2019.

While service providers continued to hire extra staff, goods producers left workforce numbers broadly unchanged.

Flash PMI data for January suggested that the strength of jobs growth was insufficient to prevent unfinished work from rising further, with sustained increases in new orders adding strain on capacity.

The upturn in backlogs was solid, but softened from December’s 14-month high.

Sub-sector data indicated that the slowdown was widespread across the manufacturing and service sectors.

Amid reports of higher fuel, metal, raw material and staff costs, average prices paid by French companies continued to increase in January.

Furthermore, the overall rate of inflation accelerated to a joint eight-month high.

Service providers saw their cost burdens rise to the greatest extent since last May, while goods producers signalled a softer and only marginal uptick in purchase costs.

In response to rising expenses, firms lifted their own selling prices during January.

At the composite level, the rise was the most pronounced in three months.

In the service sector there was an uptick in inflation, but goods producers lowered their charges for the first time in close to three-and-a-half years.