French business slump eased in December as restrictions loosened: PMI

FILE PHOTO: A woman wearing a protective face mask walks past a restaurant in Paris, before the announcement of new Covid restrictions by Paris authorities as the coronavirus disease (COVID-19) outbreak continues in France, October 5, 2020. REUTERS/Gonzalo Fuentes/File Photo

(Reuters) – French business activity unexpectedly returned almost to growth this month as some coronavirus restrictions were eased and the manufacturing sector saw a minor rebound, a monthly survey showed on Wednesday.

Data compiler IHS Markit said its preliminary Purchasing Managers’ Index rose to a four-month high of 49.6 from 40.6 in November, beating by a wide margin the 42.9 expected by economists in a Reuters poll.

The surprise improvement brought the index almost to the 50-point threshold that denotes an expansion in business activity rather than a contraction.

France began lifting some restrictions this month after imposing its second coronavirus lockdown at the end of October to contain a new wave of infections.

Though cafes, restaurants and cultural venues remain closed and some restrictions remain in place, the new lockdown officially ended on Tuesday.

Under the second round of restrictions, business activity has generally held up much better than during the first, stricter lockdown as companies have adapted to working with sanitary protocols or staff at home.

“With lockdown restrictions having eased this week and a clearer pathway to immunizing the population ahead, firms can now begin working back up towards pre-coronavirus levels of activity,” IHS Markit economist Eliot Kerr said.

“That expansionary mindset was exemplified by the first increase in employment for 10 months and confidence levels reaching their highest since January,” he added.

A flash PMI index for the service sector jumped to 49.2 from 38.8 in November, far exceeding expectations for a reading of 40.0.

In the manufacturing sector, where restrictions have had less impact on activity, the flash PMI returned to growth with a reading of 51.1, up from 49.6 last month and beating expectations for a reading of 50.1.