France: On a contraction track, for the first time in 18 months, the economy

Output in France entered contraction for the first time in 18 months, following Germany’s path, as Europe’s major economies succumb to record inflation and growing uncertainty over the course of Russia’s war on Ukrainian.

S&P Global’s composite PMI for private sector activity in France fell for August to its lowest levels since early 2021, when the country was still reeling from Covid-19 turmoil.

The price of the index fell even more than economists had predicted, falling below the 50 points that separate the territory of expansion from that of contraction, at 49.8 points.

New orders in both the services and manufacturing sectors fell, with sentiment among businesses the worst since November 2020.

Activity in services remained marginally on the territory of expansion, (51) while in manufacturing it “sunk” (49). dictates expansion, while manufacturing plummeted.

“High inflation and a waning post-Covid boost to demand has led businesses and consumers to cut spending on luxury goods,” said Joe Hayes, economist at S&P Global. “European economies head into year-end amid major challenges”.

A recession in the 19-member eurozone is now seen as a more likely scenario among economic analysts, mainly due to soaring energy costs following Russia’s attack on Ukraine, according to a Bloomberg survey.

Europe is experiencing the highest levels of inflation since the introduction of the single currency, while preparing for a further interest rate hike after the first of July by the European Central Bank.

In Germany, the corresponding indicators showed a contraction already in July, while they continued on the same route for August.