French April Industry Growth Cools as New Business Stagnates

French manufacturing and services growth cooled more than economists forecast this month as new business stagnated and employment fell.

A Purchasing Managers’ Index of factory activity dropped to 50.9 from 52.1 the previous month, Markit Economics said in London today. Economists had forecast a reading of 51.9, based on the median of 10 estimates in a Bloomberg News survey. A reading above 50 indicates expansion and the index breached that level in March for the first time in two years. The euro erased a gain against the dollar after the report.

A services gauge fell to 50.3 in April from 51.5 in March, also lower than economists had forecast. A composite measure of both industries declined to 50.5 from 51.8, Markit said.

“The nascent recovery in French private sector output lost momentum in April,” said Jack Kennedy, a senior economist at Markit. “Until we see a decisive shift in confidence, the business climate looks set to remain frail.”

The report also showed that business optimism fell to an 11-month low and both service providers and manufacturers cut prices at a faster pace. That may do little to ease concern among European Central Bank policy makers about euro-area inflation, which at 0.5 percent is less than half their target.

The euro was little changed at $1.3806 at 8:08 a.m. London time, paring a gain of as much as 0.2 percent before the report was released.

According to the PMI survey, input-price inflation in the French private sector eased to a nine-month low, with “only a fractional increase in costs.” Prices charged by companies fell the most in three months, the composite index showed.

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