France's flash PMI readings for August came in as follows:

• Flash services PMI: 48.4 vs 49.8 expected (prior 49.6)
• Flash manufacturing PMI: 51.5 vs 50.0 expected (prior 49.8)
• Flash composite PMI: 48.8 vs 49.5 expected (prior 49.4)

The French private sector economy remained weak in August, with overall business activity contracting again. On the PMI scale, where a reading of 50 separates expansion from contraction, the below-50 composite print points to another month of shrinking output. The data continues to reaffirm that France is on track for yet another subdued and mediocre quarterly showing as demand conditions stay soft. As flash estimates, compiled from the bulk of the monthly survey responses, the figures offer the first broad and timely gauge of private-sector health each month.

The services sector was the main drag, offsetting a better performance from manufacturing, where production rose for the first time since April. Of note, extreme heat was cited as a reason for lower activity levels. Demand conditions fell off further as new orders decreased modestly, extending the current period of falling sales volumes to nine months, a run that underscores how persistent the weakness in demand has become.

Meanwhile, input price inflation slowed to a five-month low, pointing to receding cost pressures, although the rate of increase in output charges was broadly unchanged. Even on the drop, the rate of input price inflation remained above that seen just before the period before the Middle East conflict. The behaviour of output charges matters beyond France's borders: services inflation has been a persistent watch-point for the European Central Bank, which targets 2% inflation across the euro area, and pricing decisions by firms in the bloc's second-largest economy feed into that picture.

S&P Global noted:

"While the weather certainly heated up across Europe this summer, France's economy is barely lukewarm. The flash PMI report revealed another month of frail economic conditions, with some firms, mainly in the service sector, highlighting the extreme heat as a reason for lower activity and demand. There was some renewed vigour in the manufacturing sector, however, as production rose for the first time since April's stockpile-driven boost, potentially indicating some more stability for factories as inflation in the goodsproducing sector remains on a downward trajectory. That said, inflation in the service sector ticked up for the first time since May as renewed pressures on global oil prices translated into higher fuel costs. Firms' decisiveness when passing on higher expenses could have implications for the inflation outlook."

The final August PMI estimates, due at the start of September, will confirm whether the flash picture of a weak services sector offsetting a modest manufacturing pickup holds.

Source: ForexLive