By Daniel Hunter

The rate of decline in French private sector output eased further in July. The Markit Flash France Composite Output Index, based on around 85% of normal monthly survey replies, posted 48.8, up from 47.4 in June. The latest reading was the highest since February 2012 and indicative of only a moderate pace of contraction.

In the service sector, business activity fell at the slowest rate for 11 months in July. In manufacturing, output increased for the first time since February 2012, and at the fastest pace for over two years.

The weaker drop in overall output across the French private sector economy reflected a similar easing in the rate of decline in new business. The latest fall in incoming new work was only modest and the slowest in 17 months. Service providers and manufacturers both signalled slower reductions in new business. Anecdotal evidence pointed to stabilising demand in certain markets, although mention continued to be made of strong competitive pressures.

Backlogs of work in the French private sector fell further in July, extending the current period of decline to 19 months. However, the latest reduction was marginal and the weakest in this sequence. Service providers indicated a slower fall in outstanding business, while manufacturers reported a rise for the first time since April 2012.

The rate of job shedding in the French private sector moderated further in July. The latest fall in staffing levels was the slowest in 15 months. Both service providers and manufacturers signalled weaker reductions in employment.

“Output in the French private sector moved closer to stabilisation at the start of the third quarter. Manufacturers actually signalled a rise in output for the first time in almost one-and-a-half years, while service providers registered a slower decline in activity," Jack Kennedy, Senior Economist at Markit and author of the Flash France PMI, said.

"With key variables such as new business, employment and backlogs of work all showing more modest declines, and service providers reporting a more positive outlook regarding future activity, momentum seems to be heading in the right direction and could herald a return to growth in the second half of the year.”

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