September 21, 2018 / 7:20 AM / 8 months ago

French business growth falls short of expectations in Sept - PMI

FILE PHOTO: Businessmen walk on the esplanade of La Defense financial and business district in Puteaux, near Paris, France, May 16, 2018. REUTERS/Charles Platiau

PARIS (Reuters) - French business activity grew at a much slower pace than expected in September as companies struggled to keep prices competitive amid softening demand, a survey showed on Friday.

Data compiler IHS Markit said the preliminary reading of its composite purchasing managers index fell to 53.6 from 54.9 in August, much weaker than the 54.7 expected on average in a Reuters poll of economists.

The result was the lowest since December 2016 and brought the index closer to the 50-point level dividing an expansion in activity from a contraction.

IHS Markit said the PMI for the dominant services sector dropped to 54.3 from 55.4 in August, missing expectations for only a slight dip to 55.2.

Service providers saw input costs rise at rates not seen since early 2011, while selling prices were nearly flat with many survey panelists reporting higher fuel and payroll bills.

High input costs also strained manufacturers’ margins, and the sector’s PMI fell to 52.5 from 53.5, well below an average forecast of 53.3.

“Companies are really struggling to pass on higher costs onto customers as the demand environment is really just not strong enough,” IHS Markit Chris Williamson said.

He said that the latest survey suggested the economy had grown about 0.4 percent in the third quarter.

On a positive note, firms continued taking on more workers at a healthy pace, especially in the service sector, which is by far the biggest employer in France. Meanwhile, confidence in future output also remained high.

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