French Growth Momentum Slows as Service Sector Starts to Suffer
France is staring at the risk of losing its key engine of growth after the expansion in services slowed to the weakest pace in four months.
IHS Markit’s purchasing managers’ index fell to 51.3 in September from 52.9 a month earlier, missing economist estimates. The reading above 50 -- a level that divides expansion from contraction -- signals that the private sector in the euro area’s second-biggest economy is barely growing.
A slowdown in manufacturing is starting to be felt in services, according to Markit. International sales in services fell for the first time in four months, and the overall pace of hiring across the French private sector was the lowest since April.
“With services firms registering their slowest rise in activity since May, fears of negative spillover effects from the manufacturing sector are coming to fruition,” said Eliot Kerr, an economist at IHS Markit. “Any intensification of such effects would likely dampen economic growth going forward.”
The signs that weakness is starting to penetrate other parts of the economy come less than two weeks after the European Central Bank decided to cut interest rates and restart its quantitative easing program.
Despite slowing momentum, French private companies remained optimistic about the one-year outlook for their business.
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