France outpaces Germany as euro zone business activity reaches new six-year high

Riding on strong demand and increasing business prospects, new data showed on Friday that business activity in the euro area hit a fresh six-year high in April.

Compared to 56.4 in March, the flash euro zone composite PMI (purchasing managers’ index) came in at 56.7 in April. Both the services sector and manufacturing are measured by the composite figure. An expansion in the sectors is represented by a number above 50.

As businesses become more positive about their future, the data showed activity in France has outperformed Germany’s in April. Since May 2011, activity was shown growing in France at its fastest pace by the figures on Friday morning. mainly in the services sector where its PMI (purchasing managers’ index) fell from 55.6 in March to 54.7 in April, there was a slight moderation in Germany at the same time.

Markit, who compile the data, said Friday that the upcoming presidential vote poses the highest near-term risk to their outlook despite the optimism in France.

“France’s elections pose the highest near-term risk to the outlook, but in the lead-up to the vote the business mood has clearly been buoyant. Growth in France has risen above that seen in Germany amid rising optimism about the future,” Chris Williamson, chief business economist at IHS Markit, said in a statement.

“The euro zone economy has enjoyed a strong start to the second quarter. The April flash PMI is running at a level consistent with 0.7 percent GDP (gross domestic product) growth, up from 0.6 percent in the first quarter. Such strong growth, if sustained, will inevitably lead to upward revisions to economists’ 2017 forecasts,” Williamson added speaking on the overall figures.

The services sector has also expanded even as a weak euro has boosted manufacturing, according to IHS Markit who compile the data. It said that this momentum has led to an uptick in employment rates.

French companies seem to be shrugging off election concerns and are boost staff. In a sign of optimism that this weekend’s elections won’t disrupt progress in the euro area’s second-largest economy, French manufacturers and service providers boosted staffing numbers.

“The numbers provide further evidence that the French private sector remains resilient to political uncertainty around the upcoming presidential election,” said Alex Gill, an economist at London-based IHS Markit. “Indeed, business optimism hit a multi-year high in April, with a number of respondents anticipating favorable business conditions following its conclusion. This has, in turn, encouraged firms to take on additional staff members.”

Followed closely by nationalist Marine Le Pen, who has campaigned on an anti-European Union platform, France’s centrist former economy minister Emmanuel Macron is narrowly leading opinion polls ahead of the first round of presidential elections on April 23.

Uncertainty ahead of the vote has caused French sovereign-debt yields to spike in a potential complication for European Central Bank policy even as surveys predict she would lose the final run-off on May 7, whoever she faces. After the murder of a policeman on the Champs-Elysees in Paris, most candidates halted campaigning on Friday. No campaigning is allowed on Saturday, the day before the vote.

(Adapted from CNBC & Bloomberg)

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