* Hollande seeking to revive corporate France with tax break
* Surveys painting mixed picture of companies' health
By Leigh Thomas
PARIS, Jan 23 French business activity shrank
again in January, albeit at a slower pace than expected, a
monthly survey showed on Thursday, adding to government pressure
to revive the struggling corporate sector.
With business recovering in much of Europe, the French
corporate sector's weak performance increasingly stands out, a
situation President Francois Hollande hopes to turn around with
new plans to cut the cost of labour in exchange for hiring and
investing in France.
Data compiler Markit said its composite purchasing managers'
index rose in January to a three-month high of 48.5 from 47.3 in
December. It remained below the 50-point threshold separating
expansions in activity from contractions.
"Companies are worried about the outlook," Markit chief
economist Chris Williamson said.
"They're worried about the political situation, about the
lack of proper reforms and just how the French government is
going to bring about a recovery in the economy," he added.
Markit's index for the services sector rose to 48.6 from
47.8 in December, beating economists' average expectation for an
increase to only 48.1.
In the manufacturing sector, the index rose to 48.8 from
47.0 in December, also beating the average expectation for a
reading of 47.5.
ROAD TO RECOVERY?
Other business confidence indicators suggest that the euro
zone's second-biggest economy may be stronger than indicated by
the closely watched PMI data
A survey from the INSEE official statistics agency found
that industry morale was stable in January in line with
expectations and at its long-term average.
Overall business morale was also stable although it still
has ground to recover before returning to its long-term average,
the survey showed.
The PMI data indicated that the flow of new business and
orders declined at a slower pace this month as companies
reported that they benefited from product launches and being
more aggressive about seizing opportunities, Markit said.
In a sign that demand from abroad rather than at home is
helping activity, manufacturers saw the flow of new orders for
export rise this month, returning to growth for the first time
in three months, although at a weak rate.
Companies also cut their prices faster as they struggled to
remain competitive, squeezing their margins and adding to
pressure to reduce staff, Markit said.
"What the survey data are showing is that the lack of
competitiveness in France and the need for structural reform is
keeping its growth rate down," Williamson said, adding that the
PMI data suggested the economy started the year in a slight
Facing weak ratings in the face of stubbornly high
unemployment, Hollande called for a pro-business shift in policy
last week and unveiled plans to cut France's high cost of labour
by 30 billion euros ($41 billion) by phasing out charges that
firms pay to finance family benefits.
Though businesses welcomed the idea of cutting labour costs,
they are wary of Hollande's plans to tie the tax break to
meeting new targets on hiring and investing in France.