July 24, 2020 / 7:24 AM / 16 days ago

French business booms more than expected in July on services rebound: PMI

FILE PHOTO: Golden Statues at the Trocadero square near the Eiffel tower wear protective masks during the outbreak of the coronavirus disease (COVID-19) in Paris, France, May 2, 2020. REUTERS/Benoit Tessier

PARIS (Reuters) - French business activity rebounded far more than expected in July as a post-lockdown recovery in the service sector shifted up a gear, a survey showed on Friday.

Data compiler IHS Markit said its preliminary purchasing managers index jumped to 57.6 from 51.7 in June, hitting its highest level since January 2018.

That easily beat economists’ average forecast for 53.5 in a Reuters poll and brought the index further away from 50-point level dividing an expansion from a contraction.

French business activity has been recovering faster than expected since the country began emerging from a coronavirus lockdown on May 11.

The government put France under one of the strictest lockdowns in Europe in mid-March, shutting down vast swaths of the euro zone’s second-biggest economy and plunging the country into its worst recession since modern records began in 1948.

Companies in both the services and manufacturing sectors both ramped up production in July as backlogs built in the face of pent-up demand unsatisfied during the lockdown.

In the dominant service sector, the PMI index jumped to 57.8 from 50.7, beating expectations for a reading of only 52.3 as the flow of new business returned to growth for the first time since February, before the outbreak.

Meanwhile, in manufacturing, the PMI index eased back to 52.0 from 52.3 in June, confounding expectations for a rise to 53.2. While production was the highest since early 2018, new orders fell slightly.

While France’s economy has been recovering more quickly than expected, Finance Minister Bruno Le Maire said on Thursday that economic data were still too fragile to revise his forecast for an economic contraction of 11% this year.

Reporting by Leigh Thomas; Editing by Toby Chopra

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