French factory activity nears 6-1/2 year high -PMI

French manufacturing activity hit a near 6-1/2 year high in September as high backlogs kept firms busy even though a strong euro dampened growth in new orders, a survey showed on Monday.

Data compiler IHS Markit said its final purchasing managers’ index rose to 56.1 in September from 55.8 in August, up marginally from a preliminary reading of 56.0.

The September reading was the highest since April 2011 and marked the 11th month in a row that the index was above the 50-point line dividing an expansion in activity from a contraction.

Manufacturers raised output to work off backlogs built up over months in which demand has grown to stand at the highest level since December 2010 , while growth in the flow of new orders eased somewhat.

“The slowdown was perhaps indicative of a stronger euro, which in turn poses a potential headwind to overall growth going forward,” IHS Markit economist Alex Gill said.

“That said, with the current period of expansion largely predicated on robust domestic demand, the effect of a stronger currency (in subduing exports) on the sector’s recovery may be limited.”

The euro has risen 12 percent since the start of the year as the currency bloc’s economy has gathered momentum, raising the prospect that the European Central Bank will start reducing its exceptional monetary stimulus.
Source: Reuters (Reporting by Leigh Thomas; Editing by Catherine Evans)