Investing.com - French private sector activity contracted at the fastest pace in over four years in January, adding to concerns over the economic outlook of the euro zone’s second largest economy.
The preliminary reading of the Markit services purchasing managers’ index came in a 59-month low of 47.5 this month down from 49.0 in December. Economists had forecast an uptick to 50.6.
In contrast, the manufacturing PMI ticked up to a three-month high of 51.2 from 49.7 a month earlier, ahead of expectations for reading of 50.0.
The composite output index, which measures the combined output of both the manufacturing and service sectors fell to a 50-month low of 47.9 from 48.7, well below expectations for 51.0.
A reading above 50.0 on the index indicates industry expansion, below indicates contraction.
The report said new orders fell for the second month in a row, while employment growth continued to decelerate, easing to its slowest rate in just over two years.
“Despite the continuation of ‘gilets jaunes’ protests, it is unclear whether the latest weak performance was caused by the resulting disruption, or whether the anticipated global economic slowdown for 2019 is already beginning to take hold," Eliot Kerr, economist survey compiler Markit said.
Despite the continued downturn in January, firms reported higher optimism towards the business outlook, with confidence at its strongest since October 2018. Both manufacturers and service providers recorded an improvement in sentiment.
“Although firms reported higher confidence in January, other forward looking indicators such as new orders fell at the fastest pace for over four years. This suggests further weak performance for France in the coming months,” Kerr added.