French services sector contracts in July as political uncertainty weighs - PMI

PARIS (Reuters) -France's services sector contracted at a faster pace in July, with political uncertainty and weak demand weighing heavily on business sentiment, an S&P Global survey showed on Tuesday.

The HCOB France Services PMI, which measures changes in business activity compared to the previous month, fell to 48.5 in July from 49.6 in June, marking the quickest rate of decline since April. A reading below 50 indicates contraction.

The survey highlighted a notable reduction in new work intakes, driven largely by domestic market weakness. Year-ahead expectations deteriorated sharply, with business confidence sliding to a six-month low.

Employment levels continued to decline, extending the trend into the third quarter, with temporary contracts less frequently renewed and voluntary departures often not replaced.

"The slowdown in business activity is increasingly reflected in capacity utilization," said Hamburg Commercial Bank economist Jonas Feldhusen. "Backlogs of work declined, and forward-looking expectations worsened significantly."

Despite the contraction, input cost inflation remained contained, although services firms raised their own prices marginally due to competitive pressures.

The composite PMI, which combines both manufacturing and services sectors, also showed a decline, falling to 48.6 from 49.2 in June. This signals a moderate but accelerated contraction in private sector business activity across France.

Overall, the data suggests limited economic momentum in the near term, raising concerns about the sustainability of the current growth path.

(Reporting by Makini Brice; Editing by Hugh Lawson)