French manufacturing activity weakest in seven months in Dec - PMI

PARIS Thu Jan 2, 2014 9:00am GMT

Peugeot 208 automobiles are assembled at the PSA-Peugeot Citroen plant in Poissy, near Paris May 15, 2013. REUTERS/Gonzalo Fuentes

Peugeot 208 automobiles are assembled at the PSA-Peugeot Citroen plant in Poissy, near Paris May 15, 2013.

Credit: Reuters/Gonzalo Fuentes

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PARIS (Reuters) - French manufacturing activity shrank at the fastest rate in seven months in December, a survey showed on Thursday, clouding the prospects for recovery in the long-suffering sector.

Data compiler Markit said its final purchasing managers' index fell to 47.0 last month from 48.4 in November. That was slightly lower than a preliminary reading of 47.1 and further below the 50-point line dividing expansions in activity from contractions.

The flow of new orders fell at the fastest pace since June, leaving manufacturers to work down backlogs, Markit said. Firms also kept cutting staff for the 22nd month in a row, in the face of weak demand.

Markit said firms reported higher input prices while tough competition kept them from passing on that increase in costs to clients, pinching their already slim margins.

"Anecdotal evidence suggested that lingering uncertainties continue to hold back the spending and investment that are necessary to support a recovery in the sector," Markit senior economist Jack Kennedy said.

"Instead, most key variables in the latest PMI survey showed deteriorating trends to suggest that no such turnaround is in sight," he added.

The picture painted by the PMI data increasingly contrasts with figures from other business sentiment surveys, which have pointed to an improvement in industrial morale.

That has left many economists stumped as to which data is best capturing the underlying trend in business activity.

The national statistics agency INSEE's monthly business climate survey indicated that morale in the industrial sector had returned to its long-term trend in December.

INSEE has also estimated that the euro zone's second-biggest economy saw a slight rebound in the final three months of 2013 with growth of 0.4 percent from the previous quarter.

(Reporting by Leigh Thomas; Editing by Hugh Lawson)

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