May 23, 2013 / 7:34 AM / 6 years ago

Business slump in May leaves France mired in recession - PMI

PARIS (Reuters) - French business activity retreated again in May despite a slight improvement in manufacturing, a survey showed on Thursday, offering little hope of a quick exit from recession in the euro zone’s second-biggest economy.

Data compiler Markit said its preliminary composite purchasing managers index, covering activity in the services and manufacturing sectors, was unchanged in May at 44.3, far below the 50-point line dividing expansions in activity from contractions.

Markit chief economist Chris Williamson said business activity remained far too subdued to declare the end of the downturn in sight.

“There is just a lack of belief that the situation is going to improve any time soon,” he added. “There is strong dissatisfaction with the government and its handling of the economy.”

The survey showed a slower rate of decline in the manufacturing sector, which saw its reading rise to a nine-month high of 45.5 from 44.4 in April, also beating economists’ average expectations for 44.8.

The larger services sector, which accounts for more than half of French economic activity, saw its index remain unchanged at 44.3, falling slightly short of expectations for 44.5.

In one positive sign, the flow of overall new business improved slightly in May thanks mainly to a slower rate of decline in manufacturing new orders.

France entered recession in the first three months of the year, posting two consecutive quarters of contraction in economic output.

The 2 trillion euro economy has struggled as business and household confidence have crumbled in the face of record jobless claims and rising taxes.

Williamson said the May PMI figures suggested the economy would contract at a rate of 0.5 percent in the second quarter, though he said the PMI data have painted a gloomier picture than GDP figures recently.

The government is hoping the economy will grow 0.1 percent this year, though even President Francois Hollande has acknowledged that the country would be lucky to achieve that.

- Detailed PMI data are only available under licence from Markit and customers need to apply to Markit for a licence.

To subscribe to the full data, click on the link below: http://www/markit.com/information/register/reuters-pmi-subscriptions

For further information, please phone Markit on +44 20 7260 2454 or email economics@markit.com

Reporting by Leigh Thomas; Editing by Hugh Lawson

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