French economy dips even as Europe grows

THE FRENCH economy slipped back into contraction after two months of growth, according to a major business survey released yesterday morning, despite the Eurozone heading towards its best quarter in three years.

According to Markit’s flash purchasing managers’ index (PMI) for the currency bloc in May, growth this quarter so far is at the strongest level since the first half of 2011. The PMI reading came in at 53.9, after a score of 54 in April. Levels above 50 indicate an expansion.

The French services and manufacturing sectors were both in negative territory, at 49.2 and 49.3 respectively.

“Of greatest concern is France, living up to its moniker of ‘sick man of Europe’ by sliding back into contraction,” said the chief economist of Markit, Chris Williamson.

The Germany economy, on the other hand, is helping to hold the overall index up. The European powerhouse’s services and manufacturing sectors had scores of 56.4 and 52.9 respectively.

European Central Bank (ECB) president Mario Draghi has strongly suggested that the institution will ease monetary policy further in June to ward off below-target inflation, with little in the PMI figures to suggest a change in direction.

“The breakdown did little to alleviate fears of deflation. While the input price balance rose to a three-month high and remained above the 50 no-change level, it was still well below its long-run average.

“And the output price balance remained below 50, indicating that output prices fell for the 26th consecutive month in May,” said Jessica Hinds of Capital Economics.