French PMI: Big Services Surprise

The April flash PMI reading for France beat expectations, with manufacturing at 59.2 (59.0 exp., 59.3 prior) and services at 50.4 (46.7 exp., 48.2 prior). Obviously the services component was the bigger surprise, coming in at an 8-month high whereas manufacturing posted a 2-month low.

• The services rebound meant overall private sector activity rose for the first time since Aug 2020.
• Per IHS Markit's report, new business increased across the private sector for the 2nd consecutive month, with the rate of growth the quickest since July 2020. Manufacturers enjoyed strong new export orders, whereas services saw a 14th consecutive month of foreign demand contraction.
• Private sector hiring remained positive, though manufacturing jobs "continued to post a much stronger rate of growth". Both services and manufacturing firms saw bigger backlogs despite hiring.
• Input price inflation accelerated the most since Jan 2018, as "input costs continued to rise sharply in April amid further panellist reports of severe global raw material shortages" - manufacturing input costs rose the fastest "in a decade".
• However, there was only a "modest" level of pass-through inflation to consumers, with service firms actually reducing prices "fractionally".
• Businesses were more optimistic: the one-year ahead outlook was the strongest since Feb 2018.