French manufacturing weakened further in June, final PMI shows

PARIS (Reuters) -French manufacturing weakened further in June, impacted by a contraction in output and a sharper fall in new orders, a business survey showed on Tuesday.

The final France HCOB manufacturing Purchasing Managers' Index (PMI) for June, compiled by S&P Global, fell to 48.1 points from 49.8 in May, albeit a bit better than the June flash manufacturing PMI which stood at 47.8 points.

A reading below 50.0 indicates contraction in activity, while above that points to expansion.

French manufacturers faced competitive pressures, leading to a reduction in selling prices for the fourth month running, despite a slight increase in input costs driven by higher raw material and energy prices, S&P Global's survey showed.

New orders decreased at the fastest pace in four months, with weak demand in both domestic and international markets, added S&P Global.

Hamburg Commercial Bank economist Jonas Feldhusen said increased defence-sector spending and monetary stimulus measures from the European Central Bank could support manufacturing in the future, but challenges remained.

"First, output contracted again after two consecutive months of modest growth, with several panellists citing persistent weakness in the automotive sector as a contributing factor. Second, domestic demand - which had exhibited a clear recovery trend since the beginning of the year - saw a notable loss of momentum in June," said Feldhusen.

"As a result, the fragile recovery path of French manufacturing has suffered a significant setback. The key question now is whether this represents a temporary correction or the premature end of a hard-won rebound," he added.

(Reporting by Sudip Kar-Gupta; Editing by Hugh Lawson)

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