The French economy may have seen a 0.5% contraction in the second quarter

(Bloomberg) — The French economy may have contracted in the three months to June, with purchasing managers’ indices suggesting a 0.5% contraction from the previous quarter.

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„Prior to the June reading, our Nowcast model showed 0% economic growth in the second quarter, with manufacturing contracting and services expanding,” said Norman Lipke, an economist at Hamburg Commercial Bank. The new June figures change the picture, saying that „not only the manufacturing sector, but also the services economy is expected to contract, and economic growth turns negative along with it.”

The flash composite PMI gauge for France fell to 47.3 this month, falling below the 50 level that separates expansion and contraction for the first time since January and hitting a 28-month low. The sub-index for services saw a similar path, while a measure for manufacturing fell further into negative territory – where it has been since February.

„While this alone does not yet represent a recession, speculation that one will occur may increase,” Liebke says.

The data is a fresh setback for President Emmanuel Macron after credit rating agencies warned in recent weeks that his government’s outlook on the economy remains too optimistic, even after France narrowly escaped a winter recession in the euro zone and in neighboring Germany.

Statistics firm Insee last week forecast economic growth of 0.6% this year, which it expects to track a multi-year deficit reduction plan presented two months ago, below the government’s 1% target.

PMI data for Germany and the euro area later on Friday are forecast to show growth in services offsetting lingering weakness in manufacturing.

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Figures for the UK and US are expected to show a slowdown. Earlier data revealed similar trends in Japan and Australia.

–With assistance from Mark Evans and Joel Rinneby.

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