France manufacturing PMI drops 0.5 points to 54.9

French manufacturers reported another improvement in business conditions during February. However, the rates of growth of output and new orders both eased from January’s strong levels to the weakest in six months. The headline Purchasing Managers’ Index (PMI) – a seasonally adjusted index designed to measure the performance of the manufacturing economy – recorded 54.9, down from 55.4 in January.

Although moderating from a near 9.5-year high, growth of manufacturing production remained marked in February. Increased output was supported by a further expansion of incoming new work, albeit the weakest since last August. Panelists commented on restocking at clients and the launch of new products as factors underpinning growth of new orders. Export sales rose at an accelerated rate, with the latest increase the strongest since December 2006. Anecdotal evidence suggested that a weaker euro had provided a boost to sales outside the single currency area.

Increased new orders acted to limit the rate of contraction of post-production inventories in February. The latest drop was only marginal and the joint-smallest in the current 16-month period of decline.

Backlogs of work at French manufacturers continued to rise during February, suggesting mounting pressure on capacity. The rate of growth of outstanding business remained strong, albeit slower than in the previous month. Correspondingly, many firms were encouraged to retain workers, resulting in the smallest drop in employment since June 2008.

Growth of purchasing activity remained solid during February, despite easing to the slowest in three months. Stocks of purchases continued to decline, but the latest reduction was the weakest since October 2008.

Stock shortages at suppliers contributed to another deterioration of vendor performance in February. Lead times lengthened at the sharpest rate for 3.5 years.

Input price inflation remained considerable, with the latest rise in purchasing costs the second-sharpest since September 2008. Panelists reported higher prices paid for a range of raw materials.

In contrast, prices charged by French manufacturers fell at the fastest pace in three months in February. Survey respondents frequently attributed lower selling prices to competitive pressures.

Commenting on the Markit/CDAF France Manufacturing PMI final data, Jack Kennedy, economist at Markit, said: “The recovery of France’s manufacturing sector remained on track in February, despite growth easing from the strong rates seen in Q4 and in January. The weak euro is providing a boost to exporters, with foreign sales rising at the sharpest rate for over three years during February. Higher workloads at manufacturers had a stabilizing effect on employment, with the latest drop in staffing levels the smallest for 20 months.”