French services sector shrinks in May at fastest pace since late 2020, PMI shows

PARIS, June 3 (Reuters) - France's services sector contracted at its sharpest pace in 5-1/2 years in May as weaker demand and rising costs due to the Iran war hammered businesses, a survey showed on Wednesday.

The S&P Global France Services final Purchasing Managers' Index (PMI) fell to 44.3 points in May from 46.5 in April. Any figure below 50 points marks a contraction in activity while above 50 points shows expansion.

The final reading was better than the flash PMI figure of 42.9, but it was nevertheless the lowest figure since November 2020, when the global economy was being hammered by the COVID-19 pandemic.

The composite final PMI for May, which includes both the services and manufacturing sectors, fell to 44.9 points from 47.6 in April. That was better than the flash figure of 43.5 points but still marked its lowest level in 28 months.

"France's service sector, which had already been showing vulnerability prior to the outbreak of war in the Middle East, suffered a heavy setback in May. Further falls in the PMI measures of activity and new business took them down to levels which ring recession alarm bells," said Joe Hayes, principal economist at S&P Global Market Intelligence.

"Geopolitical uncertainty is restricting decision-making, while surging price pressures are eroding purchasing power. It's hard to see how France's economy can spring back to life against this backdrop, strongly raising the prospect of a contraction in GDP for the second quarter," he added.

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