France: Business conditions for services firms improve sharply in August
The HCOB France Services Purchasing Managers’ Index (PMI) improved to 55.0 in August from 50.1 in July. As a result, the index moved further above the 50.0 no-change threshold, and signaled a faster improvement in services-sector business activity compared to the previous month.
In August, French service providers saw the strongest expansion in activity since May 2022, amid higher customer numbers. However, employment growth weakened and there was a sharper decrease in backlogs of work, signaling less strain on firms’ capacity.
Input cost inflation fell to 39-month low in August, though output charges increased at a quicker pace. Finally, business confidence remained subdued due to political uncertainty and weakness in the real estate sector.
Norman Liebke, economist at Hamburg at Hamburg Commercial Bank, cautioned that August’s increase may not last:
“This is no sustainable level. The French service sector saw a nearly five-point rise in its Business Activity PMI in August, reaching its highest level since May 2022. HCOB Economics thinks this is due to the Olympic Games, which was partially noted by some companies that reported greater new export business. This one-time boost is not evident in other PMI sub-indices.”