France’s firms point towards third recession

FRANCE is flirting with a potential third recession since the financial crisis, after another grim survey of the country’s firms suggests that business conditions worsened during last month.

Though the Eurozone as a whole recorded one of the best results of the past two years in Markit’s most recent purchasing managers’ index (PMI), France’s individual score suggests that the economy contracted in November.

The headline figure for the euro area PMI, announced yesterday, was 52.1. France recorded a score of only 47, below the neutral 50 mark, indicating that businesses are shrinking.

Both major sectors pointed towards another slump: manufacturing managers reported the worst conditions since May, and the headline figure in services dropped for the third consecutive month.

“France looks increasingly like the new sick man of Europe,” according to Chris Williamson, Markit’s chief economist.

“President Hollande’s modest labour market reforms of last winter had triggered a catch-up process of French business sentiment vis-a-vis the rest of the Eurozone, but the government seems to be drawing a renewed vote of no confidence from business by not going further,” added Berenberg’s Christian Schulz. Both analysts referenced the possibility that the country could enter another technical recession.

France only left recession during the second quarter of this year,with growth of 0.3 per cent. However, in the third quarter GDP shrank by 0.1 per cent, and another quarter of contraction would mark the country’s return to recession.

The Eurozone’s two largest countries are also posting dramatically different conditions: Germany’s expansion during November was the fastest since 2011, and Europe’s powerhouse economy looks to continue growing into 2014.