French Businesses, Reeling From The Impact Of The Paris Attacks, Lag Behind Germany And Eurozone

The economic impact of November’s deadly attacks in Paris is now being felt across France. Data firm Markit’s Composite Output Index, which measures overall activity in the manufacturing and services sector, dropped worryingly close to the 50-point mark, which separates growth from contraction, in December.

While economists had predicted that the key gauge would remain unchanged at November’s 51, it fell to 50.3 in December -- a four month low. The index measuring French services activity slipped to 50 from 51, its lowest level since January, while a measure for manufacturing unexpectedly rose to 51.6 from 50.6. The data from France was in sharp contrast with the performance of the euro area, which enjoyed its strongest quarter in over four years.

“French private sector output growth nearly ground to a halt at the end of 2015 amid faltering new business intakes. A slowdown in the dominant service sector was the driver, with some panelists indicating that their new business intakes had been impacted following the recent terrorist attacks,” Jack Kennedy, a senior economist at Markit, said, in a statement. “The manufacturing sector picked up momentum, however, bolstered by the sharpest rise in new orders since early-2014.”

France continued to lag behind Germany, where the Composite Output Index came in at 54.9 in December, close to November’s 55.2

The weak data comes just days after the Bank of France trimmed its fourth-quarter growth forecast for the country to 0.3 percent from an earlier 0.4 percent, as the Nov. 13 attacks took their toll on activity in the hotel, leisure and restaurant sectors.

For the euro area, Markit’s Purchasing Managers’ Index (PMI) data for the month of December stood at 54 -- close to November’s 54.2 -- an uptick in orders pushed the employment growth rate to its highest level since May 2011, indicating that companies are optimistic about the region’s economic growth.

“Although the PMI edged lower in December, the fourth quarter as a whole saw the largest increase in business activity for four-and-a-half years,” Chris Williamson, chief economist at Markit, said, in a statement. “The survey is signaling a quarterly GDP rise of 0.4 percent, meaning the region grew 1.5 percent in 2015.”

A preliminary reading of the eurozone manufacturing PMI for December rose to 53.1 from 52.8 in November -- a 20-month high.