PARIS: French business activity unexpectedly slowed in June for the first time in four months as waves of strikes added to the trouble of companies already struggling with weak demand, a survey showed on Thursday.
Data compiler Markit said a preliminary reading of its monthly purchasing managers index fell to 49.4 from 50.9 in May, well below economists' average forecast for a reading of 51.0.
That brought the index below the 50-point threshold separating an expansion in activity from a contraction, and pushed the index to its lowest level since February.
With strikes over a contested labour reform making a difficult business environment harder, the deterioration shows companies are not yet buying into signs of economic recovery as the labour market begins to improve and consumer confidence rises.
"There's an air of gloom, few drivers of growth and we see this weak trend persisting into the second half of the year unless you get a driver of change," Markit Chief Economist Chris Williamson said.
The deterioration was worse in manufacturing, where the index fell to a 16-month low of 47.9 from 48.4 in May, missing expectations for a reading of 48.8 by a large margin.
The larger services sector was not spared, with activity there stagnating. Its reading fell to a three-month low of 49.9 from 51.6, far short of forecasts that it would improve to 51.7.
In a sign of future trends, new business was largely stable for service providers, while manufacturers saw their sixth month of decline in new orders, with companies reporting clients were often reluctant to commit to new contracts, Markit said.
Despite the stable trend in services, service providers were only able to hold on to new business by cutting prices at a faster pace in the face of tough competition, weighing on their margins. - Detailed PMI data are only available under licence from Markit and customers need to apply to Markit for a licence.
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