French Manufacturing Activity Unexpectedly Returns to Growth

French manufacturing activity unexpectedly resumed growth in March with the fastest expansion in almost three years, a sign that parts of the European economy are gaining momentum.

A factory index based on a survey of purchasing managers rose to 51.9 from 49.7 in February, the highest since June 2011, a report by Markit Economics Ltd. published today in London showed. Economists predicted an increase to 49.7, according to the median of 18 forecasts in a Bloomberg News survey. A gauge of services climbed to 51.4 in March from 47.2.

“Improving conditions both at home and abroad were reported to have contributed to expansion, although there was further evidence that price discounting had been necessary to support sales,” Jack Kennedy, senior economist at Markit, said in an emailed note.

The euro region is showing some signs of recovery from the worst recession in a generation as the European Central Bank keeps interest rates at a record low to spur demand. While the euro’s climb to a two-year high of $1.3934 this month is threatening exports, Credit Agricole SA Chief Executive Officer Jean-Paul Chifflet last week forecast a “gradual” recovery in the region.

The euro strengthened against the dollar after the data, climbing to $1.3823 at 8:08 a.m. in London.

China Data

The French manufacturing index showed the first expansion of factory activity for more than two years in the euro region’s second-biggest economy. A composite measure that also includes services increased to 51.6 from 47.9, Markit said. A reading above 50 indicates expansion.

“If activity growth can gain some traction in the coming months then we could also see some improvement on the employment front, which would deliver a timely boost to confidence,” Markit’s Kennedy said.

In China today, another survey showed manufacturing weakened for a fifth straight month, deepening concern the nation will miss its 7.5 percent growth target this year. The Purchasing Managers’ Index from HSBC Holdings Plc and Markit dropped to 48.1, compared with the 48.7 median estimate of 22 analysts surveyed by Bloomberg News and February’s final 48.5 figure.

To contact the reporter on this story: John Fraher in London at jfraher@bloomberg.net

To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net; Heather Harris at hharris5@bloomberg.net Zoe Schneeweiss

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