FRANCE DATA: Aug Services Flash PMI Stronger Than Expected, Price Pressures Cool

The French services PMI was much stronger than expected at 55.0 (vs 50.3 cons, 50.1 prior), while manufacturing fell further into contractionary territory at 42.1 (44.5 cons, 44.0 prior). 

This was the highest services reading since May 2022, but we caution reading too much into the data at this stage, with improved sentiment during the Olympics possibly a factor amongst services respondents. We also note that inflationary pressures eased across both sectors in August.

Key notes from the release: 

• On services: “Greater customer numbers were frequently cited as a reason for increased output, anecdotal evidence showed.”
• “Factory output decreased at the fastest pace since January amid the most rapid deterioration in demand for French goods since May 2020”.
• “Subdued demand conditions enabled businesses to clear backlogs of work more efficiently, qualitative responses from panellists showed”.
• “Lower staffing capacity was a result of job shedding in manufacturing”… “Although services employment rose, it did so only marginally”.
• “Cost pressures across the French private sector cooled in August”… “Both sectors recorded softer increases in their costs, although manufacturers continued to see more intense price pressures than their services counterparts”.
• “Political uncertainty, challenging conditions in the real estate industry and high interest rates were cited by firms as reasons to be downbeat”.