Flash PMI Sees Limited Impact From Red Sea Tensions

The French flash February PMI comfortably surpassed expectations in both the manufacturing and services components. A first glance at the data seems positive, with limited impact cited from Red Sea tensions (though we note that higher wages were still noted as an upside inflation driver). While output remains subdued, conditions appear to be improving, which has supported employment.

Manufacturing printed at an 11-month high at 46.8 (vs 43.5 cons, 43.1 prior) while services rose to 48.0 (vs 45.6 cons, 45.4 prior), which was an 8-month high.

Key notes from the release:

• "Input prices rose at the slowest rate since March 2021, although respondents still frequently commented on higher wages".
• "The re-routing of ships away from the Suez Canal due to attacks in the Red Sea continued to have a limited effect on France’s economy. Although delivery times lengthened, it was to a weaker extent than in January".
• " French businesses expanded their workforce numbers midway through the first quarter"..."Sector data indicated that hiring was exclusive to services firms, although job shedding cooled at manufacturers".
• "Output was restricted by subdued activity at clients and a lack of new business wins. That said, there were reports of demand conditions improving, with production at some manufacturers being boosted by restocking efforts".
• On new orders: "Uncertainty among clients reportedly led to hesitancy when placing orders, while others attributed lower sales to subdued activity across the economy more broadly".