French economic outlook deteriorates as manufacturing shrinks in July -flash PMI

PARIS (Reuters) - French manufacturing activity contracted and growth in the services sector slowed in July, a preliminary purchasing managers' survey showed on Friday, in a further indication the euro zone's second biggest economy could be heading towards recession.

Data compiler S&P Global said its flash Purchasing Managers' Index (PMI) for France showed the manufacturing sub-index fell to 49.6 points, falling below the 50 point level that indicates growth in activity for the first time since November 2020. The sub-index had been forecast to come in at 50.8.

The sub-index for France's dominant services sector fell to 52.1 points, from 53.9 in June and below forecasts for a reading of 52.7. It was the third monthly decline in a row.

The data also showed the first drop in private sector new business activity since February 2021 as rising inflation -running at 6.5% as of June - weighed on customers' purchasing power.

"July 'flash' PMI data raises further concerns that the French economy is heading towards a recession", said S&P senior economist Joe Hayes.

"It’s difficult to imagine the near-term trend improving when anecdotal evidence from panellists continues to portray a picture of worsening health for demand," he said.

(Reporting by Tassilo Hummel; Editing by Susan Fenton)