October 21, 2010 / 10:12 AM / 9 years ago

French morale, activity data paint mixed picture

PARIS (Reuters) - French business confidence rose in October as demand from abroad drove a spike in new orders, but activity in the private sector slowed, suggesting the pace of recovery may be easing, data showed on Thursday.

Contributing to a mixed picture for an economy mired in a wave of strikes over pension reforms, the composite index compiled by statistics office INSEE rose to 102, topping its long-term average for the first time since June 2008.

September’s reading was revised up to 99, INSEE said, noting a clear improvement in foreign orders.

The initially reported September figure was 98, and the October result was well above the average forecast of 98 in a Reuters poll of economists.

French Economy Minister Christine Lagarde said the INSEE data showed that France was putting the international economic and financial crisis behind it.

“This confirms that French economic players are regaining confidence in the future,” she said in a statement, noting that the improvement in morale was vital to securing increased investment and a better economic performance.

Alexander Law, economist at the Xerfi consultancy, said activity remained weak despite the pick-up and had still not returned to levels see before the economic crisis.

“The crisis crushed French industry. The companies that were polled are the ones that survived. In terms of activity and wealth created, we’ve gone 15 years backwards,” Law said.

The readout from INSEE coincided with less glowing results from the PMI index, a monthly survey of corporate purchasing managers.

The flash Markit/CDAF composite PMI fell to a 13-month low of 55.3 in October from a final figure of 58.1 in September.

The slowdown was led by the service sector, while the manufacturing activity index dipped less sharply.

“The further loss of growth momentum in October will raise concerns that the recovery is running out of steam,” Markit economist Jack Kennedy said.

“However, the marked rates of expansion seen over the summer were always going to be difficult to sustain, so it is probably too early to sound the alarm bells based on this latest downshift.”

Despite the slowdown, the reading held comfortably above the 50 mark dividing expansion from contraction.

BNP Paribas economist Ken Wattret said the PMI data may have been distorted by unrest that has gripped France in recent weeks as the government tries to push through unpopular pension reforms.

“The underlying trend for growth is down. Growth in France will weaken like it is weakening everywhere else, but maybe the figures for October’s PMI exaggerate the scale of the slowdown in France,” he said.

Editing by John Stonestreet

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