Thu, 29 Oct 2020

French business activity fell in September - its first drop in four months - according to a key survey released Wednesday which found firms blamed renewed coronavirus disruptions for the slowdown.

The preliminary reading of IHS Markit's PMI survey for September came in at 48.5 points, with a reading under 50 indicating a contraction.

The index, which is based on surveys of businesses about their current activity and expectations, had come in at 51.6 in August.

"The sharp rise in Covid-19 cases recorded across France during September helped to explain the first fall in business activity since May," said IHS Markit economist Eliot Kerr.

Infections have been surging across France in recent weeks and authorities in may areas have been tightening restrictions on gatherings but have so far avoided lockdowns.

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Those restrictions have "caused hesitancy among businesses due to fears of a second round of temporary business closures," said Kerr in a statement.

IHS Markit said employment fell in September, but despite that firms were still clearing their backlogs of work and new orders had fallen.

It found that the drop in activity was centred among service firms with manufacturing companies still expanding.

While the survey also found that French firms remain optimistic about the future, Kerr said that "should the current trajectory of infection rates persist, that confidence is likely be tested in the coming months."

The French government has unveiled a massive spending plan to jump start the economy and avoid mass unemployment after lockdowns earlier this year caused unprecedented disruption.

The virus impact has plunged the French economy into its worst downward spiral since 1945, with gross domestic product plunging 13.8% in the second quarter, after a drop of more than five percent in the first.

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