More Trouble for French Wine Sector

As if the French wine sector didn't have enough troubles, now there's this: The French Purchasing Managers Index fell to 43.5 from 47.5, its lowest level in 5-1/2 years. Manufacturing has also fallen, to 48.9 from 52.8.

"These figures are very weak and raise the likelihood of a contraction in French activity in the second quarter, following stagnation in the first," says Charlotte de Montpellier, Senior Economist, France and Switzerland at ING.

Companies in both the services and manufacturing sectors atribute the PMI decline to rising energy prices linked to the war in Iran, she says.

She notes household consumption, which already edged down in the first quarter (-0.1%), is likely to contract further, as indicated by declining demand in the services sector. Investment, already in negative territory (-0.4%), is also set to weaken further amid rising pessimism among households and businesses and higher long-term interest rates. "Avoiding a contraction would require a strong positive contribution from exports. While this is possible in some specific sectors, current data suggests it is unlikely to be broad-based."