Flash PMI Weaker Across The Board, Wage Pressures Seen In Services

France December flash PMI came in notably softer than expected on both the manufacturing and services components, with EGB futures jumping higher on release. The services component was 44.3 (vs 46.0 cons, 45.4 prior), while manufacturing was 42.0 (vs 43.3 cons; 42.9 prior).

The release shows a softening in inflationary pressures overall, but that wage costs were driving up input costs amongst service sector firms. Key notes from the release are:

• "December survey data pointed to a cooling of inflationary pressures across France. Input costs continued to be driven higher by services companies, which firms explained was primarily a result of higher salary expenses".
• Prices charged increased at a weaker rate than November, "reflecting sustained discounting by goods producers and less aggressive price setting by service providers".
• "French factories reduced staffing numbers further, more-than-offsetting a marginal uptick in hiring at services companies".
• "Survey respondents attributed lower activity levels to weak demand conditions, reduced customer purchasing power and general sluggishness across the economy".
• "French factories continued to perform far worse than their services counterparts", though the downtick in services activity was the main driver of the weak composite print.