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French service sector growth weakened in May - final PMI

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Businessmen enjoy the good weather at lunch time under the Arche de la Defense, in the financial district west of Paris, as warm and sunny weather continues in France

PARIS (Reuters) - Growth in business activity in France's dominant services sector weakened in May compared to April, a monthly survey showed, as the positive effect of fewer COVID-19 restrictions were offset by inflationary pressures.

Data compiler S&P Global said its final purchasing managers index (PMI) for France's services sector fell to 58.3 points in May from 58.9 in April. A flash estimate had forecast a May services PMI figure of 58.4 points.

Any figure above 50 indicates expansion.

IHS Markit's overall composite PMI index, which includes the services and manufacturing sectors, also fell to 57.0 points in May from 57.6 in April. A flash estimate had forecast a May composite PMI figure of 57.1 points.

Data published earlier this week showed the French economy unexpectedly shrank in the first quarter as consumers struggled to cope with surging inflation that reached a record-high rate of 5.8% over 12 months in May.

"The direction of travel for the French economy appears to be critically dependent on what happens in the service sector, given the notable range of headwinds facing goods producers at present. In the near-term, survey indicators suggest that economic growth is likely to continue," said S&P Global Market Intelligence senior analyst Joe Hayes.

"Nevertheless, we must remain mindful of the downside risks at play. Sooner or later, the boost from fewer COVID-19 restrictions will begin to peter out. Spillover risks from manufacturing weakness, as well as output price inflation, which hit a new series peak in May, also pose sizeable threats to demand for services," added Hayes.

(Reporting by Sudip Kar-Gupta; Editing by Toby Chopra)

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