Sharpest decline in business activity in France for nearly five years
Staff Writer |
Service providers in France recorded a second successive monthly contraction in business activity during January.
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Moreover, the pace of decline accelerated to its quickest for almost five years.
New business fell faster in January, driven by the sharpest decrease in new work from abroad since November 2016.
Meanwhile, employment growth softened to its weakest rate for two years, and outstanding business fell for the first time in 35 months.
However, despite deterioration in key indicators, confidence towards the business outlook was broadly unchanged.
The headline seasonally adjusted IHS Markit France Services Business Activity Index – which is based on a single question asking respondents to report on their actual change in business activity at their companies compared to one month ago – fell to 47.8 in January, down from 49.0 in December.
The result represented the second consecutive monthly contraction in business activity at French service providers, with the pace of decline accelerating compared to December.
Some panellists blamed January's moderate decrease on a weak demand environment.
New business also fell for the second month in a row at the start of 2019.
The rate of contraction accelerated to its fastest for just over five-and-a-half years, with three of the six covered sub-sectors recording declines.
Contributing to the quicker reduction in overall new business was a solid fall in new business from abroad.
French service providers recorded their fastest decline for 34 months, with panellists citing the disruption caused by the 'gilets jaunes' movement and softer foreign demand.
Meanwhile, businesses increased their staff numbers at the weakest rate for two years in January.
Following a third successive deceleration in the rate of job creation, firms registered only marginal employment growth overall.
Backlogs of work fell for the first time for almost three years during January.
Moreover the pace of decline was the strongest since May 2013, driven by a sharp fall in the 'Other' Services sub-sector.
On the price front, input cost inflation eased to the softest rate for nine months.
That said, the latest rise in operating expenses was sharp overall.
Some panellists suggested that the increase was primarily caused by wage pressures.
In contrast to the slower rise in input costs, French service providers increased their output charges at the quickest pace since June 2018.
However, the rate of inflation in output prices was only moderate overall.
Finally, confidence towards the business outlook among French service providers was broadly unchanged from December's 25-month low.
When expressing positivity, some survey respondents cited new product development initiatives aimed at increasing business activity. ■