French Output Growth Cools as Manufacturing Weakness Persists

Balint Porneczi/Bloomberg

France’s private-sector output lost momentum this month as manufacturing shrank for an 11th consecutive month, holding back the recovery.

Markit Economics said on Tuesday that its composite Purchasing Managers Index for services and manufacturing slipped to 51.7 from 52.2 in February. While the factory measure rose to 48.2 from 47.6, it remained below the 50 mark that divides expansion from contraction. The services gauge declined to 52.8 from 53.4.

Markit economist Jack Kennedy in London said the survey showed a “tentative expansion of output” and he estimates the economy will record “modest” growth this quarter.

“However, the divergence in sector performance continued, with the service sector again shouldering the burden of expansion amid ongoing contraction in manufacturing,” he said.

France lags behind the region’s largest economy, Germany, as European Central Bank policy makers push governments to implement reforms to complement their monetary stimulus. The ECB began buying sovereign debt this month to prevent a deflationary spiral of falling consumer prices and households postponing spending.

While risks to the currency bloc’s economy remain to the downside, Draghi said on March 16 that “a sustained recovery is taking hold” and “we can rightly be optimistic about the outlook.”

The factory index in France fell short of economists’ forecast for a reading of 48.5, based on a Bloomberg News survey. The services gauge beat the median estimate of 52.5.

In Germany, manufacturing and services activity probably picked up in March, with a composite index due 9:30 a.m. Frankfurt time forecast to rise to 54.1 from 53.8 the previous month. Economists predict a similar gauge for the euro area will rise to 53.6 from 53.3. That report is due at 10 a.m.

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