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French Manufacturing Activity Shrinks for Fourth Month in August

French Manufacturing Activity
An employee stands by knitting machines inside the factory of 174-year-old beret-maker Laulhere in Orolon-Sainte-Marie, France. Photographer: Balint Porneczi/Bloomberg

French manufacturing activity contracted for a fourth month in August, signaling that the euro area’s second-largest economy is unlikely to return to growth after stagnating in the first half.

A Purchasing Managers Index for the manufacturing industry fell to 46.5 from 47.8 in July, London-based Markit Economics said today. That’s the lowest level in more than a year. Economists forecast no change, according to a Bloomberg News survey. A composite gauge of both manufacturing and services activity rose to 50, the mark that divides expansion from contraction, from 49.4.

French gross domestic product remained unchanged in the first two quarters of the year, prompting the government to abandon its deficit target for 2014. France, which has repeatedly failed to meet fiscal rules agreed with European Union partners, has called on the European Central Bank to do more to support the region’s recovery.

“The data point to quarterly GDP tracking around stagnation in the third quarter, continuing the flat trend seen since the turn of the year,” said Jack Kennedy, a senior economist at Markit. “Modest expansion in France’s dominant service sector masked ongoing weakness in manufacturing during August.”

A measure of services growth rose to a five-month high of 51.1 from 50.4 in July, according to today’s report.

The French government now predicts full-year growth of 0.5 percent for 2014 instead of 1 percent announced previously, Finance Minister Michel Sapin said on Aug. 14. This year’s deficit will exceed the limit of 4 percent of economic output agreed less than four months ago with the commission, the EU’s executive body.

Manufacturing and services activity in Germany slowed to 54.6 in August from 55.7, according to a separate survey. That report is due at 9:30 a.m. Frankfurt time. A similar gauge for the euro area weakened to 53.4 from 53.8, economists predict. Markit will release the data at 10 a.m. today.

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