January 6, 2014 / 8:54 AM / 4 years ago

French services sector contraction accelerates in Dec - PMI

Waiters rush to serve clients Place du Tertre in the former village of Montmartre near the Sacre Coeur Basilica in Paris April 10, 2009.Charles Platiau

PARIS (Reuters) - French services companies saw business pull back in December at its fastest pace in six months, weighing on overall private sector activity, although their outlook for the months ahead brightened, a survey showed.

Data compiler Markit said on Monday its purchasing managers index for services fell last month to 47.8 from 48.0 in November, slightly better than a preliminary reading of 47.4.

Falling to its lowest point since last June, the index dropped further away from the 50-point threshold dividing an expansion in activity from a contraction.

Markit's overall PMI index, which includes the services and manufacturing sectors, fell to 47.3 from 48.0 in November, also not as bad as the 47.0 originally reported.

The service sector was hit by a fall in the flow of new work and firms responded to the slack in business conditions by cutting staff for the second month in a row, albeit by less than in November.

Panellists' business expectations improved last month and the figure was just shy of a 17-month high reached in October.

"Persistently weak demand continues to impact on the sector's performance," Markit senior economist Jack Kennedy said. "However, firms hold some positivity that the situation will improve in 2014."

France has increasingly stood out in Europe as its PMIs have worsened while those elsewhere in the continent have improved.

Further complicating the picture, business surveys by the official statistics office and the central bank which use a wider pool of panellists have painted a less grim picture of corporate morale.

With profit margins close to a 30-year low and unemployment a near-record 10.9 percent, President Francois Hollande offered in his new year's address to cut firms high payroll tax in exchange for hiring.

The announcement has been seen as a pro-business shift in the unpopular leader's economic policy as he struggles to get the euro zone's second biggest economy into recovery mode.

His Socialist government currently expects the economy to grow 0.9 percent this year, counting on a rebound in business investment to drive growth.

Reporting by Leigh Thomas; Editing by Catherine Evans

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