PARIS: French service sector activity shrank in February at its fastest rate in nearly four years, a survey showed on Thursday, suggesting the euro zone's No. 2 economy is far from the turnaround emerging in Germany.
The fresh sign of weakness casts a pall over the economic outlook for France, which has had to abandon its deficit target because growth is proving far weaker than expected.
The Markit flash purchasing managers' index (PMI) for private sector services came in at 42.7 for February, down from 43.6 last month and hitting its lowest since February 2009, when France was suffering the worst of the global financial crisis.
A corresponding index for the manufacturing sector rose to a two-month high of 43.6 from 42.9 in January. Both indexes remain well below the 50 point line dividing a contraction in activity from expansion.
"There is a fairly consistent picture showing that the French business sector is suffering its worst downturn since the height of the financial crisis," said Chris Williamson, chief economist at Markit.
Markit's composite PMI index, covering activity in the services and manufacturing sectors combined and accounting for roughly two-thirds of French economic output, fell to 42.3 from 42.7 in January, also its lowest level in nearly four years.
Williamson said French exporters were benefiting from a broader euro zone upswing. Data from the INSEE statistics office on Wednesday showed a pickup in industry morale.
The rate of job shedding in the private sector slowed slightly but remained solid in February, marking the 12th consecutive month of falling employment.
Overall, the surveys pointed to a 0.7 per cent contraction in GDP for the first quarter of 2013, placing France's economy on the same playing field as Spain and Italy - and not Germany, which recent data suggests is picking up momentum.
After contracting 0.3 per cent in the final three months of 2012, the French economy was seen shrinking by 0.1 per cent in the first quarter, a Reuters poll of 24 economists showed.
"The fact that French indicators are still turning down at an increased rate shows there has been no impact from any structural or productivity reforms," Williamson said.
President Francois Hollande's government acknowledged last week for the first time that the deficit target of 3 per cent of output was out of reach because growth would fall short of the official forecast of 0.8 per cent this year.
The government is waiting for forecasts from the European Commission on Friday before drafting new targets, with French media reporting that Brussels estimated the economy will post nearly flat growth this year and a deficit of 3.6 per cent.
Standard and Poor's chief European economist Jean-Michel Six said that keeping the deficit on a downward trend was more important than hitting the deficit target.
"For a ratings agency like ours, it is the trend that counts much more than a specific level at a specific time which in itself reflects a European economy beyond the control of the authorities," Europe 1 radio quoted Six as saying on its website.
S&P, which rates France AA+ with a negative outlook, said in a report on the euro zone on Wednesday that reforms had become more of a priority in France and that that would be key to anchoring a stable rating.
indiatimes.com
The fresh sign of weakness casts a pall over the economic outlook for France, which has had to abandon its deficit target because growth is proving far weaker than expected.
The Markit flash purchasing managers' index (PMI) for private sector services came in at 42.7 for February, down from 43.6 last month and hitting its lowest since February 2009, when France was suffering the worst of the global financial crisis.
A corresponding index for the manufacturing sector rose to a two-month high of 43.6 from 42.9 in January. Both indexes remain well below the 50 point line dividing a contraction in activity from expansion.
"There is a fairly consistent picture showing that the French business sector is suffering its worst downturn since the height of the financial crisis," said Chris Williamson, chief economist at Markit.
Markit's composite PMI index, covering activity in the services and manufacturing sectors combined and accounting for roughly two-thirds of French economic output, fell to 42.3 from 42.7 in January, also its lowest level in nearly four years.
Williamson said French exporters were benefiting from a broader euro zone upswing. Data from the INSEE statistics office on Wednesday showed a pickup in industry morale.
The rate of job shedding in the private sector slowed slightly but remained solid in February, marking the 12th consecutive month of falling employment.
Overall, the surveys pointed to a 0.7 per cent contraction in GDP for the first quarter of 2013, placing France's economy on the same playing field as Spain and Italy - and not Germany, which recent data suggests is picking up momentum.
After contracting 0.3 per cent in the final three months of 2012, the French economy was seen shrinking by 0.1 per cent in the first quarter, a Reuters poll of 24 economists showed.
"The fact that French indicators are still turning down at an increased rate shows there has been no impact from any structural or productivity reforms," Williamson said.
President Francois Hollande's government acknowledged last week for the first time that the deficit target of 3 per cent of output was out of reach because growth would fall short of the official forecast of 0.8 per cent this year.
The government is waiting for forecasts from the European Commission on Friday before drafting new targets, with French media reporting that Brussels estimated the economy will post nearly flat growth this year and a deficit of 3.6 per cent.
Standard and Poor's chief European economist Jean-Michel Six said that keeping the deficit on a downward trend was more important than hitting the deficit target.
"For a ratings agency like ours, it is the trend that counts much more than a specific level at a specific time which in itself reflects a European economy beyond the control of the authorities," Europe 1 radio quoted Six as saying on its website.
S&P, which rates France AA+ with a negative outlook, said in a report on the euro zone on Wednesday that reforms had become more of a priority in France and that that would be key to anchoring a stable rating.
indiatimes.com
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