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French Manufacturing Contracts in Sign of Sluggish Recovery

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July 24 (Bloomberg) -- French manufacturing contracted in July at the fastest pace this year in a sign that the euro area’s second-largest economy is struggling to gather pace.

A Purchasing Managers Index for the manufacturing industry fell to 47.6 from 48.2 in June, London-based Markit Economics said today. That’s the lowest since December 2013 and the third straight reading below 50, the mark that signals contraction. Economists had forecast a decrease to 48, according to a Bloomberg News survey.

The French economy stagnated in the first three months of this year, compared with a 0.2 percent expansion in the 18-nation euro area. Second-quarter gross-domestic-product data are due on Aug. 14, and will be a key element in the European Central Bank’s assessment of the state of the economy.

France’s PMI data “remain consistent with quarterly GDP close to stagnation levels as the economy continues to show little sign of turning around its recent sluggish performance,” said Jack Kennedy, senior economist at Markit. Weakness in the manufacturing industry “offset a small improvement in services,” he said.

A gauge of services activity rose to 50.4 from 48.2 in June, indicating growth for the first time in three months. A composite index of both services and manufacturing rose to 49.4 from 48.1.

Markit will release data for Germany, Europe’s biggest economy, at 9:30 a.m. Berlin time. Its report for the euro area is due at 10 a.m. Economists predict the currency bloc’s factory index will fall to 51.7 from 51.8, with the composite index unchanged at 52.8.

To contact the reporter on this story: Stefan Riecher in Frankfurt at sriecher@bloomberg.net

To contact the editors responsible for this story: Patrick Henry at phenry8@bloomberg.net; Jana Randow, Angela Cullen

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