French services sector experiences strongest growth since May 2022

05 Sep, 2024

French services sector experiences strongest growth since May 2022

France's services sector experienced significant growth in August, marking its strongest expansion in over two years. The HCOB France Services PMI Index surged to 55.0, a notable increase from July's 50.1, largely driven by the upcoming Olympic Games and a rise in domestic demand. Despite this sharp growth, economist Norman Liebke of Hamburg Commercial Bank noted that this boost is unlikely to be sustainable, as other PMI sub-indices did not reflect the same improvement.

While new business inflows saw a partial recovery in August, driven mainly by domestic orders, business from foreign customers continued to decline for the sixth consecutive month. Employment growth slowed for the fourth month in a row, with the job creation subindex nearing the neutral mark. Although input cost inflation fell to a 39-month low, service providers raised prices more aggressively, driven largely by wage pressures.

Overall business confidence remained cautious due to political uncertainty, and backlogs of work decreased at the fastest rate since January, signaling reduced capacity strain. The HCOB France Composite PMI, which includes manufacturing and services, rose to 53.1 in August, with the strong performance of the services sector accounting for the positive momentum.