French business activity perked up unexpectedly in June as a stronger than expected service sector made up for a softer manufacturing sector, a survey published on Friday showed.

Data compiler IHS Markit said its preliminary composite purchasing managers index, comprising both sectors, rose in June to 55.6 from 54.2 in May.

That beat economists’ average expectations in a Reuters poll for a stable reading and brought the index further away from the 50-point line dividing an expansion in activity from a contraction.

IHS Markit economist Paul Smith said that the reading was consistent with quarterly economic growth of 0.3 per cent this quarter.

Panellists reported success turning firmer market demand into new contract wins

“France’s economy showed noticeably divergent trends at the end of the second quarter, with the manufacturing and service sectors heading in markedly different growth directions,” Smith said.

While the dominant and more domestically focused service sector was benefiting from improved demand at home, manufacturers were seeing weaker export demand as well as growing price pressures, he said. The service sector PMI rose to 56.4 from 54.3 in May, easily beating economists expectations on average for a steady reading of 54.3.

Meanwhile, in the manufacturing sector, the PMI eased back to a 16-month low 53.1 from 54.4 in May, falling short of expectations for a reading of 53.9.

The flow of manufacturers’ new orders was the weakest since February 2017 but capacity pressures kept factories busy working off backlogs of unfinished work. Meanwhile, in the service sector, IHS Markit said panellists reported success turning firmer market demand into new contract wins.

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