France March final manufacturing PMI 48.5 vs 48.9 prelim

• Prior 45.8

It’s a marked improvement but the French industry is still largely struggling since last year. There were still reductions in both output and new orders and until that changes, it will be tough to see things turn around meaningfully. HCOB notes that:

“France’s industry is failing to break out of recession. Despite a significant improvement in the HCOB PMI for manufacturing
in March and an even more pronounced increase in the output index, the situation remains sobering. While weak order
intakes were generally cited as the reason for the production decline, there were occasional reports of improved sales
conditions. French politics remain a major impediment, as uncertainty from Paris hampers investment. Prime Minister
Bayrou’s government remains unstable, heavily reliant on the support of more radical forces in parliament and paralyzed on
its own.

“French industrial companies continue to report rising prices. Input prices increased in March compared to the previous
month, but inflation remains below the historical average. The higher dollar exchange rate seen in recent months and
increased supplier prices have drove up operating costs. Capital goods manufacturers recorded the highest inflation rate for
input costs. Due to weak demand, companies are unable to pass on the high prices, resulting in shrinking output prices.
Competitive pressure and subdued demand prompted factories to lower their prices.

“The outlook for French industry is not rosy. Order intakes, both domestic and international, remain in decline despite a
slower contraction in March. For international orders, companies cited Africa and Asia as growth markets, but these failed to
offset weakness elsewhere. Regarding year-ahead output expectations, there was some improvement. The overall level of
positive sentiment was the highest in nine months, as companies anticipate a rise in production following the introduction of
new products and hope for a recovery in sales.”

This article was written by Justin Low at www.forexlive.com.