French Economy Picks Up as Services Counter Manufacturing Slump

France’s services sector led a pickup in economic activity this month, offsetting a sixth contraction in manufacturing.

The improvement in services lifted France’s composite Purchasing Managers’ Index to a 10-month high of 51.6 from 50.1 in July, IHS Markit said in London on Tuesday. The factory gauge slipped to 48.5, below the 50 level that divides expansion from contraction.

The French economy unexpectedly stalled in the second quarter, due partly to inventories, and the Bank of France expects growth to resume in the three months through September. IHS Markit remained cautious on the outlook, however, citing moderate growth in new business at companies.

“France’s private-sector economy gathered some momentum in August,” said Jack Kennedy, an economist at IHS Markit. “That said, the trend in incoming new business remains muted while firms indicated a return to job shedding in the latest month, suggesting that the recovery remains stuck in the slow lane.”

The services PMI rose to 52 in August, the highest since October, from 50.5.

In the euro area, the composite PMI is forecast to slip to

53.1 from 53.2. IHS Markit will publish that report at 9 a.m. London time.

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