Business activity shrinks in Socialist France; still waiting on Hollande to make moves

While the rest of the eurozone was off to an at least relatively decent start in terms of business activity throughout the first few weeks of 2014, the bloc’s second-largest economy is still very much down in the mouth — but hey, the rate at which their business activity has lately been shrinking did slow down ever so slightly, so that’s… something, I suppose.

French business activity shrank again in January, albeit at a slower pace than expected, a monthly survey showed on Thursday, adding to government pressure to revive the struggling corporate sector.

With business recovering in much of Europe, the French corporate sector’s weak performance increasingly stands out…

Data compiler Markit said its composite purchasing managers’ index rose in January to a three-month high of 48.5 from 47.3 in December. It remained below the 50-point threshold separating expansions in activity from contractions.

“Companies are worried about the outlook,” Markit chief economist Chris Williamson said.

“They’re worried about the political situation, about the lack of proper reforms and just how the French government is going to bring about a recovery in the economy,” he added.

Oof. There were a few semi-positive indicators in the mix, but the gist is still one of stagnation — the only good news there being that France’s continued lethargy could maybe help to encourage along some of the necessary political teeth to Socialist President Francois Hollande’s recent white-flag-waving overture to more business-friendly policies by promising to bring down government spending a big notch in exchange for lower taxes on labor. The details on that plan, however, are still pretty thin, and a final policy change is still going to depend on negotiations with politicians, labor unions, and business leaders. To help propel France’s business confidence, there was some hope that Moody’s might relent on Friday in their Aa1 credit rating and negative outlook for the country, but nothing doing there, via Bloomberg:

France’s Aa1 credit rating was affirmed by Moody’s Investors Service, which maintained a negative outlook based on the continued reduction in the competitiveness of the nation’s economy.

The decline risks triggering a further deterioration in France’s government financial strength and the nation’s long-term growth prospects, Moody’s said in a statement today. The debt-to-GDP ratio has risen to 93.6 percent in 2013 from 90.2 percent in 2012, and Moody’s expects a further increase to above 95 percent by the end of 2014.