French Economic Contraction Accelerates on Pandemic Curfews

(Bloomberg) — France’s private-sector economy shrank at a faster pace in January as curfews hit consumption.

IHS Markit’s index of activity dropped to 47, the fifth straight month it’s been below 50, which marks the dividing line between expansion and contraction.

Service providers reported a quicker drop in business, and manufacturers saw a fresh downturn after a bump in December.

Input costs rose at the strongest pace for a year. Some companies mentioned severe delays at some suppliers which contributed to higher raw material prices, notably those of metals.

One rare bright spot was an upturn in employment for the first time in almost a year, driven by services. Businesses generally said they are optimistic about the next 12 months.

“The fact that firms have returned to recruitment activity points to some confidence in an economic recovery in the second half of this year,” said Eliot Kerr, an economist at IHS Markit. “Whilst this bolsters hopes of activity growth to follow in the coming months, the timing and scale of the recovery does, however, ultimately remain contingent on the rollout of vaccines.”

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