French Economy Stays on Downward Trend at Start of 2019

(Bloomberg) -- An expected rebound in French activity in January failed to materialize, which will increase worries about the euro area’s second biggest economy.

IHS Markit’s measure of manufacturing and services dropped to 47.9, the lowest in more than four years, from 48.7 in December. That’s a shocking miss compared with forecasts in a Bloomberg survey for a pickup to 51.

French Economy Stays on Downward Trend at Start of 2019

A reading for the euro area due later is expected to increase to 51.4 from 51.1, but the disappointing French number means that’s now in question.

French activity has been disrupted in recent months by the Yellow Vests protests, a movement that started because of a planned tax hike but has since expanded to include demands to increase the incomes of working-class people.

“Despite the continuation of ‘gilets jaunes’ protests, it’s unclear whether the latest weak performance was caused by the resulting disruption, or whether the anticipated global economic slowdown for 2019 is already beginning to take hold,” said Eliot Kerr, an economist at IHS Markit.

The European Central Bank’s Governing Council meets in Frankfurt on Thursday, and President Mario Draghi will offer his views on the economy at a press conference at 2:30 p.m. in Frankfurt.

©2019 Bloomberg L.P.