French public sector surveys point to lasting downturn

(Reuters) - France's private sector slumped for the 10th month in December, suggesting the economy will end the year in decline, while tumbling demand pointed to a lengthy downturn, surveys suggested on Friday.

The Markit/CDAF flash composite purchasing managers' index (PMI) came out at 45.0 for the month, up from 44.3 in November, but still firmly below the 50 mark where it has been stuck since March this year.

The manufacturing PMI inched up to 44.6 from 44.5, while services rose to 46.0 from 45.8.

But the composite average for the quarter came out at 44.3, its lowest in almost four years.

Markit said data pointed to a 0.7 percent drop in economic output in the fourth quarter.

The composite new orders index hit its lowest since early 2009 at 42.6 after 43.4 last month, offering little hope of a lift from demand.

"We're expecting some gloomy GDP data (...) and the omens are not looking good for the first quarter of next year," said Markit's chief economist Chris Williamson.

"France's growth is now becoming more aligned with that of its southern neighbors of Spain and Italy, and it's diverging with the north, especiallyGermany," he said.

France's 1.9 trillion euro ($2.5 trillion) economy has been struggling to gain momentum for most of this year, raising fears it could be the next euro zone country to tip into recession, defined as two successive quarters of shrinking output.

After stagnating in the first quarter, gross domestic product shrank 0.1 percent from April to June, then surprised with 0.2 percent growth in the third quarter, although few expect that positive news to last.

Markit's Williamson said industrial output was stronger than expected over the summer, giving a temporary lift to growth. But output fell sharply in October and he said it was unlikely to deliver any positive surprises for growth in the final quarter.

The pace of job cuts has been accelerating since the summer, and confidence levels remain low. The Bank of France, meanwhile has said it expects the economy to shrink by 0.1 percent over the final three months of the year.

The flash services data showed expectations regarding activity were moderately positive in December, up from the previous month. But confidence remained far below the survey's long-term average, reflecting weak economic conditions and demand.

- Detailed PMI data are only available under license from Markit and customers need to apply to Markit for a license.

(Reporting by Vicky Buffery; Editing by Hugh Lawson)