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Weaker fall in activity during May in France

Christian Fernsby |
French private sector activity fell further in May as restrictions designed to stem the spread of global coronavirus disease continued to weigh on the economy.

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Topics: FRANCE   

However, the rate of reduction in activity eased noticeably from April’s unprecedented contraction as some firms began to reopen.

The softer decrease in output was driven by slower declines in output in both the manufacturing and service sectors.

The fall in output at manufacturers was slower than at service providers, although both contractions remained historically marked.

The coronavirus outbreak and resulting lockdown measures continued to supress demand in May.

New business fell for the third month in a row, with the rate of decline remaining considerable overall.

That said, the latest reduction was much softer than April’s extreme fall.

International demand continued to tumble in May, with new export orders falling for the fifth month in succession.

However, the rate of reduction eased from April when it was the sharpest since composite data were first available in September 2014.

At the sub-sector level, both manufacturers and service providers saw softer, but still considerable, declines.

Amid a further decline in new business, private sector firms continued to pare back staff numbers in May.

The rate of workforce contraction was weaker than in April, but remained historically marked.

Sector data suggested that manufacturers cut employment at a quicker pace than service providers.

Subdued demand conditions saw backlogs of work fall further in May, extending the current sequence of decline to three months.

Though sharp, the latest reduction was softer than April’s historic decrease.

Service sector firms registered a faster contraction than their manufacturing counterparts.

Input prices faced by private sector companies in France fell for the third successive month in the latest survey period.

However, following April’s sharp decrease, the rate of reduction eased in May and was modest overall.

Anecdotal evidence suggested that the influence of falling oil prices on related goods more than offset higher costs for inputs in short supply.

In line with the trend for input prices, firms continued to cut their average output charges in May.

Though marked overall, the latest reduction was softer than April’s recent record.

At the sector level, the fall in output prices was noticeably softer at manufacturers for the second month in a row.

Finally, French businesses remained pessimistic towards the 12-month business outlook in May, driven by expectations of a prolonged global economic slowdown.

That said, the degree of negativity eased since April, with some panellists expecting a steady rise in output as lockdown restrictions are removed.

Of the two covered sectors, manufacturers were the most pessimistic, although service providers also anticipated a reduction in activity over the next year.

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