Brisker French service sector growth heralds “punchy” Q3 GDP – PMI

Brisker growth in France’s service sector encouraged firms to raise prices for the first time in 5-1/2 years, in another sign of a strengthening recovery in the euro zone’s second-largest economy, a survey showed on Wednesday.

Data compiler IHS Markit said its purchasing managers index for services jumped in September to 57.0 from 54.9 in August, just shy of a flash reading of 57.1 but well above the 50-point threshold dividing an expansion in activity from a contraction.

IHS Markit’s overall PMI index, which includes the services and manufacturing sectors, rose to 57.1 from 55.2 in August, a touch below the 57.2 originally reported.

“Positive service sector trends mirrored those seen at manufacturers,” IHS Markit economist Alex Gill said.

“The PMI is indicative of another punchy GDP number for the third quarter of the year,” he added.

The economy has gained traction since the end of last year, posting growth of 0.5 percent in the last three quarters, buoyed by rock-bottom interest rates, tax cuts for companies and a pick-up among France’s euro zone trading partners.

The strong composite PMI number for the third quarter – which averaged 56.0, just below the 56.7 seen in the second quarter – is good news for President Emmanuel Macron, providing a benign backdrop to his plans to reform labour market rules and cut the budget deficit.

The fact that French service sector firms were able to raise prices for the first time since March 2012 will also be welcomed by the European Central Bank, which has so far failed to bring inflation in the currency bloc closer to its target of almost 2 percent.
Source: Reuters (Reporting by Michel Rose; Editing by Hugh Lawson)