Prior 48.8Manufacturing PMI 52.8 vs 49.5 expectedPrior 50.0Composite PMI 47.6 vs 48.6 expectedPrior 48.8
French economic activity is seen contracting at its quickest pace in 14 months as the fallout from the Middle East conflict continues to bite at Europe’s second largest economy. That comes despite some positive news from the industrial side of things, with stronger factory output growth recorded for the month.
That being said, the jump in factory order books owes much to some frontloading activity. It is the first time in nearly four years that the order book expanded but it is mostly due to clients bringing forward purchases ahead of expected shortages and price increases as supply issues arise from the Strait of Hormuz closure.
To nobody’s surprise, input price inflation continued to surge higher in April – rising to a three-year high. A mix of higher costs for energy,
fuel, transportation, chemicals and metals were commonly
mentioned by panellists. So, just be mindful of that as it will eventually reverberate to all other aspects of the economy in due time.
HCOB notes that:
“There is a lot to unpack in the latest ‘flash’ PMI data
for France. The service economy has deteriorated
due to a diminishing willingness to spend – a typical
consequence of uncertainty – pulling overall business
activity levels lower. Preventing the headline ‘flash’
index from falling even further below 50.0 was the
manufacturing sector, which saw a production rebound
in April. However, this does not look like a turning point
and will likely be temporary, as our survey respondents
reported advance purchasing from customers in
anticipation of price increases, shortages and logistics
issues.
“Unsurprisingly, manufacturing inflation moved even
higher in April as a range of raw material costs rose,
transportation became more expensive and supply
bottlenecks pushed up prices. Services companies are
also feeling the pressure from higher transportation
costs. What’s most notable is that the passthrough
to prices charged for goods and services remains
contained. Services charges have barely moved since
the outbreak of the war, which will be a welcome sight
for policymakers in the European Central Bank. How
long this continues remains to be seen, however, given
the strain that corporate margins will be feeling.”
This article was written by Justin Low at investinglive.com.