French Service Industry Slumps as Hollande Confronts Recession

French service industry output slumped to a 46-month low and manufacturing fell, adding to indications Europe’s second-largest economy may be in recession.

Services output fell to its lowest since March 2009, with the Purchasing Managers’ Index falling to 43.6 from 45.2 in December. The manufacturing PMI slipped to 42.9 from 44.6, a four-month low. A reading below 50 indicates a contraction.

The declines underline how President Francois Hollande is struggling to revive growth in the wake of Europe’s sovereign debt crisis. Jobless claims are at their highest in 15 years and will probably increase again when the labor ministry publishes December figures later today, according to five economists surveyed by Bloomberg.

“French flash PMIs are falling heavily,” said Dominique Barbet, an economist at BNP Paribas in Paris. “General activity remains very weak and confirms our forecast of two consecutive quarters of contraction.”

The French economy is expected to contract 0.1 percent in the current quarter after shrinking an estimated 0.3 percent last quarter, according to the median of nine forecasts in a Bloomberg survey published on Jan. 17. That suggests France has slipped into a recession for the first time since 2009.

The International Monetary Fund cut its 2013 growth forecast for France yesterday to 0.3 percent from 0.4 percent. “This is still above our estimate, which is zero growth for a second year running,” Barbet said.

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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