French economic activity falls markedly in May, steepest decline in five-and-a-half years

Services PMI 42.9 vs 46.6 expectedPrior 46.5Manufacturing PMI 48.9 vs 52.2 expectedPrior 52.8Composite PMI 43.5 vs 47.7 expectedPrior 47.6Welp, there goes the floor. The pain is starting to hit now as the fallout from the Middle East conflict intensifies. The headline services print and the composite print are the lowest in 66 months, marking the steepest decline in French economic activity in five-and-a-half years. Yes, it’s the biggest dip in activity since the Covid pandemic period.Firms frequently cited fuel and energy cost
pressures, as well as general economic angst, as reasons for
lower output.And after some frontloading activity in March and April, manufacturing output also fell back into contraction territory in May.In adding insult to injury, inflation pressures continue to accelerate with cost pressures being the strongest since May 2023. The graph below pretty much says it all:If you’re not thinking about stagflation hitting Europe just yet, this definitely ought to be a good wake up call to that.S&P Global notes that:”May’s ‘flash’ PMI survey for France provides a dire set
of numbers. The inflationary impact of the oil-price
shock continues to proliferate, with price indices
in both manufacturing and services moving higher
once again. The surge in oil prices has hit households
and businesses both directly at the fuel pumps, and
indirectly as higher transportation and production
costs are passed through to final goods and services.
The concern is that a broader uplift in the economy’s
overall price level raises the risk of further demand
destruction. Alarmingly, we saw private sector new
orders plummet in May, giving us a clear indication that
this shock has materially lifted recession risks for the
eurozone’s second-largest economy.”
This article was written by Justin Low at investinglive.com.

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