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Julien Manceaux, senior economist at ING, notes that the French manufacturing PMI index showed some resistance in October, increasing slightly and remaining above the 50.0 level.

Key Quotes

“It’s only a matter of time before it drops below 50.0 and confirms activity contraction.”

“On the contrary, the service sector still seems unaffected by the industrial troubles. The latter is due to a slowdown in investments and a contraction of external demand while the service sector is still benefiting from high consumer confidence. The service PMI indicator rebounded in October, from 51.1 to 52.9, which is above its 3Q19 average (this being the best quarter in more than a year) and a recent INSEE survey showed that hiring intentions have not been higher in the last 16 months. It is therefore too soon to see a contagion from the industrial gloom to services.”

“As the French economy is more reliant on services than on the industry which represent around 15% of value added (half the German figure), we believe that this week’s surveys confirm that the French economy should resist the current global slowdown for longer. 3Q19 GDP growth will be published next week and is likely to show a still strong domestic demand, paving the way for a 1.3% GDP growth this year. However, the last official projections for 2020, at 1.2%, are already looking rosy.”