French economy driven by service sector growth in July

Growth continued to be widespread throughout the French manufacturing and service sectors, although markedly sharper in the latter. The flash services activity dropped in July to 55.3, a two-month low. Meanwhile French manufacturing PMI index rose to 53.1 in July, a two-month high.

Service providers saw a 25th straight growth in business activity, buoyed by a further increase in new orders. Strong economic conditions and the football World Cup were cited as factors contributing to growth. The pace of rise eased slightly from June but stayed marked overall.

Manufacturers also recorded a rise in output in the month. The pace of rise accelerated from June but continued to be moderate and among the weakest in the current 23-month sequence of growth. Although new orders rose, manufacturing exports dropped for the first time since September 2016 in the midst of reports that global trade tensions was hampering foreign demand. Capacity pressures facing French private sector companies continued during June, extending the current sequence of backlog accumulation to 29 months. However, the rise was focused on service providers, as manufacturers registered a fall for the first time since June 2016.

Increasing overall workloads encouraged private sector firms to take on additional workers for the 21st successive month in July. The pace of job creation continued to be far sharper than the long-run series average, in spite of weakening from June. Service providers recorded a slower gain in jobs, while the pace of growth was unchanged at manufacturers.

Average input costs faced by French private sector companies rose in July, thus continuing a trend that has been observed since March 2016. The pace of inflation eased slightly from June but continued to be above the long-run series average. Manufacturers continued to see a sharper rate of increase than their service sector counterparts. Higher raw material costs, including oil, plastics, paper and steel as well as greater transport costs all contributed to strongest inflation for five months.

Consistent with higher cost burdens, private sector companies upped their average selling prices in July. The rise was widespread throughout the manufacturing and service sectors. The pace of inflation was sharper at manufacturers.

At 16:00 GMT the FxWirePro's Hourly Strength Index of Euro was bearish at -99.7441, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -22.8927. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex