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French manufacturing propels economic growth as services slow

Frankfurt - French manufacturing unexpectedly expanded at the fastest pace since 2011, underpinning a recovery in the eurzone’s second-largest economy that was long in the making.

A Purchasing Managers’ Index (PMI) for the industry rose to 55.8 in August from 54.9 in July, according to IHS Markit. Economists surveyed by Bloomberg predicted the gauge would signal a slowdown in factory activity. A PMI for services fell to a seven-month low of 55.5.

The French economy is enjoying its strongest continuous expansion since 2011 - finally catching up with its European peers - after the election of Emmanuel Macron as president bolstered sentiment. The Labour Ministry is set to give unions a preview this week of its plans to overhaul the employment market.

“The data are particularly promising for the manufacturing sector, with output and new order growth at multi-year highs,” said Alex Gill, an economist at IHS Markit. “With capacity pressures intensifying, signs are that unemployment will continue to decline in the third quarter.”

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A composite PMI for French manufacturing and services remained at 55.6 in August.

A gauge for Germany due at 9:30 Frankfurt time probably also held at its July reading. Economists predict a PMI for the eurozone will slip to 55.5 from 55.7. That data is due at 10:00.

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