French economic growth looks to have started 2017 at a respectable clip. With a flash composite output reading of 53.8, up from a final 53.1 in December, business activity expanded more quickly than expected and, indeed, at its fastest pace in some sixty-seven months.
However, the headline improvement was wholly attributable to a pick-up in activity rates in services where the flash PMI rose a full point to 53.9, a 19-month peak. Its manufacturing counterpart fell, although only by a minimal 0.1 points to 53.4.
Crucially, new business continued to increase in both sectors as did backlogs, potentially pointing to rising pressure on capacity. Aggregate employment was up for a third consecutive month and, while still quite modest, by the largest amount in more than five years. Business optimism in services remained positive but was slightly weaker than in December.
Overall input costs climbed sharply in both sectors but selling prices fell for a remarkable fifty-seventh straight month as a rise in manufacturing was more than offset by a decrease in services.
In general, today's finding are slightly stronger than expected and consistent with a pick-up in economic growth this quarter. The only real negative is (again) the persistent weakness of prices. This simply underlines the need for a solid and durable upswing in domestic demand if businesses are to even start to restore heavily squeezed profit margins back to more normal levels.