France PMI manufacturing dropped to 51.2 in October, down from 52.2 and missed expectation of 52.4. That’s also a 25-month low.
PMI services rose to 55.6, up from 54.8 and beat expectation of 54.7, and hit a 4-month high. PMI composite rose 0.3 to 54.0.
Commenting on the Flash PMI data, Sam Teague, Economist at IHS Markit said:
“October data signalled a mixed picture for the French private sector. On one hand, service sector activity growth accelerated to a four-month high thanks to stronger new business growth. On the other hand, the manufacturing sector shifted down a gear in October, as firms reported the first fall of output for over two years.
“Anecdotal evidence pointed towards a weaker automotive sector. This helped to explain another deterioration in manufacturing exports and the weakest level of business confidence among manufacturers for 28 months, which was partly linked to worries across the automotive supply chain.
“Nonetheless, job creation accelerated to a six-month high across the private sector, partly due to stronger inflows of new business. In spite of improved employment and output growth, capacity pressures remained elevated, particularly in the service sector.
“On the price front, cost pressures continued to build amid higher fuel and wage bills. The latest data did suggest a slight respite for French businesses, however, with input price inflation easing marginally from September’s eight-month high.”
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ECB Knot: Expect 50bps in Feb and Mar, and more in May and June
ECB Governing Council member Klaas Knot said in a WNL interview, “expect us to raise rates by 0.5% in February and March and expect us to not be done by then and that more steps will follow in May and June.”
“In the December data, we saw a first decline in headline inflation, but that was entirely due to base effects and lower energy inflation,” Knot said. “We focus on core inflation where, unfortunately, there is no good news. Because it is still on the rise. Underlying inflationary pressures show no signs of abating yet.”
In a separate interview with La Stampa, Knot said, “At some point, of course, the risks surrounding the inflation outlook will become more balanced… That would also be a time in which we could make a further step down from 50 to 25 basis points, for instance. But we are still far away from that.”