FRPMI
  • Prior 47.3
  • Composite PMI 49.3 vs 48.0 prelim
  • Prior 47.8

The reading still marks a contraction in business activity but much less pronounced after the revision. Of note, the fall in new orders and employment were not as marked as the months before. HCOB notes that:

“The French private sector economy seems like it’s on the brink of exiting contraction. The composite HCOB PMI improved to 49.3 in May, still below the growth threshold, but marking the highest reading so far this year. The upward trend is visible in both manufacturing and services PMIs.

“Overall market conditions remain constrained, with both domestic and foreign demand continuing to decline, though at a slower pace. While there are tentative signs of a recovery in market demand, optimism for improvement in the coming year has deteriorated further, suggesting that service providers remain unsettled by ongoing uncertainty. It remains to be seen how effective President Macron’s efforts to attract research and investment to France will be.

“Profit margins in the French service sector appear to have narrowed in May. Input cost inflation accelerated, driven in part by wage pressures. At the same time, output prices declined, indicating that firms were unable to pass on rising costs to customers. Competitive pressures prompted companies to lower their prices despite increasing cost burdens. The ECB might feel supported by this price trend, leaving scope for them to cut rates again at the next meeting tomorrow. Looking ahead, we anticipate two additional rate cuts from the ECB later this year.”

Source: Forex Live