French factory activity hits 16-month low in June - PMI

An employee holds glass at a factory in La Chapelle-Saint-Mesmin, near Orleans, France March 10, 2017. REUTERS/Benoit Tessier

PARIS (Reuters) - French manufacturing growth slowed more than previously thought in June to its weakest pace in nearly a year and half in the face of softer client demand, a survey showed on Monday.

Data compiler IHS Markit said its final purchasing managers’ index fell to 52.5 in June from 54.4 in May. That was lower than a preliminary reading of 53.1 and brought the index closer to the 50-point line dividing expansion in activity from contraction.

Manufacturing activity eased as the inflow of new orders grew at the slowest rate in nearly two years. Nonetheless, firms kept adding to staffing levels at a solid pace, which helped slow the build-up of order backlogs.

“It seems that the source of the slowdown in production growth has shifted from capacity constraints and supply chain bottlenecks to a general soft patch for new order books,” IHS Markit economist Tim Moore said.

“Most worryingly, the latest slowdown in new business growth was accompanied by a sharp and accelerated rise in manufacturing input costs.”

Moore said survey panelists reported in particular higher prices for steel and aluminium, which have been hit by U.S. import tariffs.

With input prices at their highest since January, manufacturers’ operating margins were squeezed as selling prices grew at a much slower pace, albeit up from an eight-month low reached in May.

Reporting by Leigh Thomas; editing by John Stonestreet