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French Private Sector Growth At 5-Month Low

French private sector activity expanded at the weakest pace in five months, due to weakening trends in both services and manufacturing, survey data from S&P Global showed on Thursday.

The flash composite output index, which combines manufacturing and services, dropped to 52.8 in June from 57.0 in May. The index was forecast to fall to 56.0.

A reading above 50 indicates expansion in the sector. The private sector expanded for the fifteenth month in a row.

However, private sector output grew at its weakest rate since January's Omicron disruption.

The survey data was collected from June 13-21.

The services Purchasing Managers' Index also fell to a five-month low of 54.4 in June from 58.3 in May. The expected score was 57.6.

The easing trend in services growth was mainly linked to growing uncertainty and deteriorating economic conditions.

The manufacturing PMI dropped to a 19-month low of 51.0 in June from 54.6 in the previous month. That was also well below the expected score of 54.0.

Further, goods production deteriorated for the first time in eight months on weaker demand conditions amid high inflationary pressures, and supply-side issues persisted against the backdrop of the war in Ukraine.

Despite easing slightly from May, input prices rose at one of the quickest extent on record across the French private sector.

The elevated level of cost inflation was largely attributed to higher prices of raw materials, fuel and transport, and rising wages. In response to high input cost, firms raised their selling prices further.

France's private sector companies remain optimistic about the next 12 months, but the level of confidence dropped to a 19-month low in June due to a weakening outlook for manufacturers and service providers.

Due to a less positive future outlook, private sector employment rose at the weakest pace in four months in June. The slowdown in jobs growth was more evident in the manufacturing sector. At the same time, a resilient hiring trend at services firms ensured the overall expansion in staffing levels remained strong by historical standards.

"The slowing economic trend in France is also compounded by a fresh bout of political uncertainty due to the hung parliament result in the national elections", Joe Hayes, senior economist at S&P Global Market Intelligence, said.

"Overall, June 'flash' PMI data add to tangible recession risks for France," the economist added.

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