PARIS May 23 Activity in the French private sector surged to a six-year high in May as growth in the
dominant service sector accelerated and the election of President Emmanuel Macron lifted business optimism, a survey
showed on Tuesday.
Data compiler IHS Markit said its preliminary reading of its monthly purchasing managers' index (PMI) rose to 57.6 this month from 56.6, reaching the highest level since May 2011.
The reading lifted the index further away from the 50-point threshold dividing contraction from expansion in activity. It also beat economists' average forecast of 56.7 and the highest estimate in a Reuters poll, which was for 57.5.
"Overall this is a really encouraging picture of the current health of the French economy," IHS Markit chief economist Chris Williamson said.
A breakdown of the survey results showed that index for France's dominant services sector rose to 58.0 from 56.7,
beating expectations for 56.5.
Manufacturing saw its index drop slightly however, falling to 54.0 from 55.1, undershooting expectations for a slight
increase to 55.2.
"I wouldn't worry too much about the drop in manufacturing," Williamson said. "That pulled back possibly because of signs the stronger euro may be denting firms' expectations of what they might be able to achieve in export growth over the year ahead."
In a good sign for unemployment, which remains high at 9.6 percent, French companies continued to increase staffing numbers in May, a trend that has been evident since November last year.
Firms also raised prices for the second consecutive month, which Williamson said was a sign they were now confident demand was strong enough to pass on rising costs to their clients.
French companies' optimism about output growth over the next 12 months also rose to 69.7, the highest level since IHS Markit started measuring it in 2012.
"That's a great sign that companies are pleased with the election result and looking forward to stronger growth ahead," Williamson said.
Macron, a pro-business, Europe-minded centrist elected just over two weeks ago, has pledged to loosen labor regulations and cut corporate tax among other business-friendly promises.
(Reporting by Michel Rose; Editing by Catherine Evans)