2023-06-23 09:38:00
The specter of a recession hangs over France again. The “Flash composite” index, published by S&P Global, which measures private sector activity, stood at 47.3 in June, against a value revised down slightly to 51.2 in May, reaching one point low since February 2021 and ending four consecutive months of expansion. A value above 50 is synonymous with expansion of activity, while a value below this threshold is synonymous with contraction.
A deterioration in the service sector
This sharp drop in the index is mainly due to the deterioration observed in the services sector (48 in June against 52.5 in May). Among the reasons for this decline in activity cited in the survey, conducted among a representative panel of 750 companies, include inflation, the tightening of financial conditions and even business closures. The decline, which began in mid-2022, continued for manufacturing production (44.2 in June against 44.7 in May).
“The latest ‘PMI Flash HCOB’ data is far from painting a picture of the French economy as encouraging as that painted in recent months,” commented Norman Liebke, economist at Hamburg Commercial Bank, which publishes the index with S&P Global. According to him, “the risk of seeing a recession materialize increases”.
The confidence displayed by companies regarding an increase in their activity over the next twelve months is also at an all-time low. It is at its lowest level since May 2020, in a context nevertheless marked in June by an easing of inflationary pressures and growth in the workforce in services.
The whole euro zone is affected
If France recorded its weakest performance in June, all the other countries are affected by these poor figures. Private sector growth in the euro zone slowed sharply in June, falling to a level close to zero, weighed down by the difficulties of the industry, still according to the “PMI Flash” index published by S&P Global.
It fell to 50.3 in June, after 52.8 in May, the lowest for five months, ” signaling a very sharp slowdown in the region’s economic growth “S&P explained in a press release. Thus, after three months of strong expansion, growth has virtually stagnated in Germany.
Employment growth has slowed and the 12-month outlook for activity has deteriorated. The only good news is that the economic slowdown has been accompanied by a sharp easing of inflationary pressures. ” Prices paid and prices charged by companies recorded their smallest increases since December 2020 and March 2021 respectively “, is it specified in the press release.
Concern over the impact of rising interest rates on demand
Companies within the 20 countries sharing the single currency declare themselves “ increasingly concerned about the evolution of demand, due in particular to the impact of the rise in interest rates, and the associated risk of recession », note S&P. This bad indicator is published two weeks after a downward revision of growth figures for the euro zone which fell into recession this winter. GDP fell by 0.1% between January and March, after a decline of the same magnitude from October to December.
Eurozone officially in recession according to latest Eurostat figures
« After two consecutive quarters of contraction, the risk of a further fall in eurozone GDP in the second quarter increased in June commented economist Cyrus de la Rubia. ” The bearish curve of the index announces a difficult second half for private companies in the euro zone, characterized by a general decline in order books in the coming months ».
(With AFP)
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