The Paris 2024 Olympic Games helped boost the French economy in August, with the country’s private sector reporting its strongest month of growth since March 2023, a new report has found.
The HCOB Flash France Composite PMI Output Index, data for which is connected from a representative panel of around 750 companies based in the French manufacturing and service sectors, rose by more than three points in August, to 52.7, from 49.1 in July.
This is the first time since April of this year that the index has posted above 50.0, which is ‘indicative of
business activity growth,’ according to S&P Global, which compiles the index.
Upturn in services activity
According to the report, a strong upturn in services activity propelled the broader economy. This came despite an intensification of manufacturing malaise, as factory orders fell at the steepest pace in over four years.
The report highlights that the growth was primarily driven by a strong upturn in services activity, despite continued struggles in the manufacturing sector. Factory orders fell at their sharpest rate in over four years, yet the increase in services activity, spurred in part by the Olympics, was sufficient to drive overall economic growth. The service sector saw its fastest expansion in over two years, attributed to higher customer numbers, according to anecdotal evidence.
However, despite this growth in services, manufacturing output declined at the fastest rate since January, with demand for French goods deteriorating at the most rapid pace since May 2020. Additionally, after six months of job creation, net private sector employment in France decreased in August.
French private-sector firms remain ‘positive’ in terms of their output expectations for the remainder of the year, however the level of optimism was slightly lower in August.
Economic growth in third quarter
“The French economy will likely grow 0.5% in the third quarter,” commented Norman Liebke, economist at Hamburg Commercial Bank. “The HCOB France Flash PMI for August indicates an improvement in economic conditions, with the Composite PMI jumping over three index points to 52.7. This can be tracked back exclusively to the service sector, with the business activity index rising almost five points. It should be emphasised that August is likely an outlier due to the Olympic Games. However, the manufacturing sector continues to struggle, with production declining even more sharply than in July.
“Service providers will have benefited from the Olympic Games. The HCOB Flash PMI for French services activity jumped to 55.0, its highest level since the second quarter of 2022 when GDP growth reached 0.4%. The one-off nature of this boost is evident in the worsening employment situation, weaker output expectations and declining backlogs of work.”
