French growth lagging rest of euro area in September, PMIs show

Though anything above 50 indicates expansion, the decline points to slower growth.

“The disappointing performance of the goods-producing sector has so far been offset by stronger expansion in the larger services sector, which means the economy looks to have grown at a reasonable 2.5% annualized pace in the third quarter”, said Chris Williamson, chief economist at Markit.

The slowdown came amid debate on whether the European Central Bank should expand its stimulus programme to have more impact on inflation and growth.

Average selling prices were meanwhile largely unchanged compared with August.

“The survey data indicate that the Euro Area economy expanded 0.4% in the third quarter, in line with the second quarter”.

While a Purchasing Managers’ Index for manufacturing and services slipped to 53.9 in September from 54.3 in August, the third-quarter average stood at the highest level in more than four years, according to a report published on Wednesday. It is, he notes, “one of Germany’s most important global champions” and an “important growth driver for the German economy”.

Factory and services output in the euro area cooled slightly more quickly than expected in September, despite quicker growth in new work and order backlogs.

“Inflows of work showed the smallest rise since the start of 2014, and job creation has also slowed”.

However, in a worrying sign for President Francois Hollande, who has pinned his hopes of re-election on a drop in unemployment, French firms shed jobs at the fastest rate in 10 months, with some panelists saying they had chosen not to replace voluntary leavers. Manufacturers and services providers both reported slightly weaker growth of output.

While the rate of expansion in business activity in France picked up from the near-stagnation seen in August it remained only modest, with France’s composite PMI reaching 51.4 in September, up from 50.2 in August.

While it marks in improvement on last year’s growth, the data points to 1.6 per cent annual growth this year, which Williamson says is still below the pace regarded as the Eurozone’s long-term potential.