U.S. Markets

French business activity slows unexpectedly as COVID-19 cases spike -PMI

FILE PHOTO: Women, wearing protective face masks, walk past the department store Le Printemps Haussmann decorated with a discount sign in Paris on the first day of summer sales following the outbreak of the coronavirus disease (COVID-19) in France, July 15, 2020. REUTERS/Gonzalo Fuentes

PARIS (Reuters) - French business activity slowed to a four-month low in September, with services weaker than expected as France struggles to contain a surge in new COVID-19 cases, a monthly survey showed on Wednesday.

Data compiler IHS Markit said its preliminary Purchasing Managers’ Index (PMI) fell to 48.5 in September from 51.6 in August, falling short of expectations for 51.9 in a Reuters poll of economists.

That brought the index below the 50-point threshold demarcating growth in activity from a contraction and was the lowest since May, when France emerged from a two-month coronavirus lockdown that plunged the economy into recession.

France has seen new infections spiral higher in recent weeks to record levels, leading to the imposition of some new restrictions to try to slow the spread of the coronavirus and reduce the number of intensive care admissions.

“The rise in case numbers has been accompanied by fresh restrictions, but has also caused hesitancy among businesses due to fears of a second round of temporary business closures,” IHS Markit economist Eliot Kerr said.

“For now, at least, firms remain optimistic towards the year ahead outlook, but should the current trajectory of infection rates persist, that confidence is likely be tested in the coming months.”

The survey showed confidence falling in particular in the services sector, where a flash PMI fell to 47.5 from 51.5 in August, hitting the lowest level since May and falling short of expectations for a stable reading at 51.5.

In contrast, the smaller manufacturing sector saw a slight improvement, with its index rising to 50.9 from 49.8, slightly exceeding expectations on average for a reading of 50.5.

Reporting by Leigh Thomas; Editing by Catherine Evans