August 21, 2014 / 7:01 AM / 3 years ago

French business activity stagnant in August - PMI

PARIS, Aug 21 (Reuters) - French business activity was stagnant in August, a survey showed on Thursday, as an improvement in the services sector could not fully offset the worst performance in over a year in manufacturing in the euro zone's second-biggest economy.

Data compiler Markit said its composite purchasing managers index of activity in both the manufacturing and services sector rose to 50.0 from 49.4 in July, hitting the 50-point line that separates growth in activity from contraction.

"France isn't improving but it is stabilizing ... at least that's a bit more positive than what we were seeing before," said Markit Senior Economist Rob Dobson, who nevertheless called the manufacturing index "quite a weak reading."

"While services is having a mildly positive effect and is coming back and showing some growth ... manufacturing continues to be a real drag on the economy," Dobson said.

Markit's PMI index for the manufacturing sector slipped further to 46.5 from 47.8, the worst performance since May 2013. That fell short of economists' expectations on average for an unchanged reading of 47.8.

Fewer new orders, from both the domestic and export markets, weighed on the long-struggling sector.

A marginally brighter spot was services, where the index rose to 51.1 from 50.4, outperforming expectations for a reading of 50.0, helped in part by a slight strengthening in new business for the first time in five months.

Dobson said that was hopefully a sign that the French domestic market, while not actually improving, was at least showing signs of stabilizing.

The French economy posted no growth in the three months to June, the second quarter in a row of stagnation.

As a result, the Socialist government of President Francois Hollande slashed its 2014 and 2015 growth forecasts last week. It now targets 0.5 percent growth for this year, half its earlier forecast.

(Reporting By Alexandria Sage; Editing by Toby Chopra)

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