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French services growth slows despite price cuts

French service sector growth eased in August more than previously thought, falling for the third month in a row even though firms stepped up discounting, a monthly survey showed on Tuesday.

Data compiler IHS Markit said its purchasing managers index for services fell in August to 54.9 from 56.0 in July, worse than a preliminary reading of 55.5.

The index reached its lowest level since January and edged close to the 50-point threshold dividing an expansion in activity from a contraction.

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Growth in new orders slipped to a seven-month low even though service providers cut prices at the fastest pace since November of last year.

“The softening trend was echoed by a further dip in business confidence, which was perhaps reflective of uncertainty relating to the impact of the new administration’s proposed reforms,” IHS Markit economist Alex Gill said.

“Nonetheless, expectations remained firmly positive amidst a robust domestic and global economic backdrop. Indeed, business optimism was borne out via another marked round of job creation, which looks set to support business activity growth in the coming months,” he added.

The softer trend in services contrasts with the smaller, more internationally focused manufacturing sector, where activity reached a six-year high in August despite the euro’s strength, according to IHS Markit’s survey for the sector published on Friday.

IHS Markit’s overall PMI index, which includes the services and manufacturing sectors, fell to 55.2 in August from 55.6 in July, worse than the 55.6 originally reported. (Reuters)

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