French business boom eases in August as staffing, price pressures bite -PMI

People walk on the esplanade of La Defense in the financial and business district of La Defense, west of Paris
FILE PHOTO: People walk on the esplanade of La Defense in the financial and business district of La Defense, west of Paris, France March 26, 2018. REUTERS/Gonzalo Fuentes

September 3, 2021

PARIS (Reuters) – French business activity grew in August at its slowest rate in four months as staff shortages and costs pressures worsened, a monthly survey showed on Friday.

Data compiler IHS Markit said its final Purchasing Managers’ Index (PMI) for France’s dominant services sector fell in August to 56.3 points from 56.8 in July – its lowest reading since April.

The index was slightly below a preliminary reading for August of 56.4 points.

IHS Markit’s overall final composite PMI index, which includes the services and manufacturing sectors, fell to 55.9 points in August from 56.6 in July but was in line with an initial reading.

The index for both services and composite PMI remained nevertheless well above the 50-point threshold dividing an expansion in activity from a contraction.

“The economic recovery in France continued to move along at a solid clip during August,” IHS Markit senior economist Joe Hayes said.

“We’re still seeing strong demand, and firms are adjusting their workforces to accommodate growing order books,” he added.

Supply chain issues due to the pandemic continued to constrain supplies of raw materials, driving up prices, albeit slightly less than in July.

Meanwhile, the government is looking to wind down most of its crisis support programmes for companies other than those still struggling.

The euro zone’s second-biggest economy has spent 80 billion euros – nearly 4% of GDP – in various support programmes to keep companies afloat during the COVID-19 crisis.

Finance Minister Bruno Le Maire said this week the economy was now operating at 99% of its pre-crisis level, reiterating a 6% economic growth target this year.

(Reporting by Matthieu Protard; editing by Leigh Thomas and Toby Chopra)