Prior 49.6Manufacturing PMI 48.4 vs 48.5 expectedPrior 48.1Composite PMI 49.6 vs 49.3 expectedPrior 49.2The reading reaffirms a continued pick up in momentum in the French economy, but still largely short of crossing over the pivotal 50.0 mark. The good news is that services activity continues to improve with the headline reading being a 11-month high. That said, there are some notable weak spots in the report with new orders seen decreasing markedly and at an accelerated pace while business confidencedeteriorated sharply to its weakest since last November. HCOB notes that:“The latest HCOB Flash PMIs from France are neither fish nor fowl. While momentum has been trending upward since thebeginning of the year, the index remains below the critical 50-point threshold. This continues to signal a deterioration ineconomic conditions, albeit one that is only marginal. France remains under considerable pressure, both economically andpolitically. GDP growth is unlikely to exceed the 1% mark this year. At the same time, questions are mounting over whetherPrime Minister Bayrou can sustain his austerity course politically. Global trade upheaval is compounding the strain onFrance as a business location, though the recent deal between Washington and Tokyo may bring a potential EU–USagreement closer within reach.“Conditions in the service sector remain subdued. Business activity is stagnating at a low level, showing little movementcompared to June. Particularly concerning is the sharp decline in the sub-index for future business expectations. This drop islikely a direct response to Bayrou’s draft budget proposal, presented in parliament last week. Should an agreement on theausterity package be reached, it would reduce disposable income for many households—posing clear downside risks fordomestic demand and especially for the services sector. Conversely, failure to reach a budget deal could further escalatepolitical uncertainty.“The situation in the manufacturing sector also remains tense. The slight uptick in the headline index should not beoverinterpreted. Of greater concern is the sharp decline in forward-looking sub-indices: both order intakes and businessexpectations fell significantly in July. This likely represents increased domestic uncertainty due to the fresh austerityproposal, and international unease stemming from protectionism in global trade policy. There is, however, a faint glimmer ofhope on the pricing front as after a period of price reductions, output prices edged up again in July, helping firms to recoupmargin losses in recent months.” This article was written by Justin Low at investinglive.com.