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(Bloomberg) — French business activity declined at the fastest pace since October as the Iran war threatens to derail the country’s economic revival.
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S&P Global’s Composite Purchasing Managers’ Index dropped to 48.3 in March from 49.3 in February — remaining below the 50 mark separating expansion from contraction. Analysts polled by Bloomberg had anticipated a decrease to 49.3.
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While manufacturing stayed in growth territory — even improving slightly from the previous month — the gauge for services sank to 48.3.
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“For now, France’s burgeoning recovery looks to be on ice,” Joe Hayes, principal economist at S&P Global Market Intelligence, said Tuesday in a statement. “A sharp reduction in business confidence backs this assessment, with the threat of higher inflation, prolonged supply-side disruption and heightened near-term uncertainty prompting a re-evaluation of the outlook.”
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France had been successfully weathering unstable governments and public finances but now faces an external threat that it can do little about. The fighting in the Middle East has sent energy costs surging, with the knock-on effects for Europe likely to be faster inflation, higher interest rates and slower economic expansion.
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PMIs are closely watched by markets as they arrive early in the month and are good at revealing trends and turning points in an economy. A measure of breadth of changes in output rather than depth, business surveys can sometimes be difficult to map directly to quarterly GDP.
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Euro-zone data will arrive at 10 a.m. CET. Composite readings from the UK and the US due later in the day are both expected to remain above 50.
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—With assistance from Harumi Ichikura, Joel Rinneby and Mark Evans.
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