French economy roars into 2018 after year of surprise turnaround: PMI

Data compiler IHS Markit said its preliminary manufacturing index (PMI) jumped to 59.3 in December from 57.7 the month before, blowing past expectations of economists polled by Reuters and hitting a more than 17-year high.

The reading for the dominant service sector edged down to 59.4 this month from 60.4 in December, slightly below expectations, but still far above the 50-point threshold separating expansions in activity from contractions.

That gave an overall composite index of 60.0 points, a touch below the 60.3 recorded in November but above the 59.4 forecast by economists and only the second time since May 2011 that the index reached the 60 mark.

"France is very much leading the pack in the fourth quarter in terms of overall growth rates," IHS Markit Chief Economist Chris Williamson said, adding that the reading was consistent with economic growth of 0.7-0.8 percent in the fourth quarter.

"The fact the French economy has shaken off its malaise, picking up growth momentum almost continually throughout the year to end on this super strong high note is a key factor into why the euro zone is doing so well," he said.

Businesses saw a further rise in new orders, with demand coming from both the domestic market and foreign clients, and created new jobs for the 14th month in a row to help go through accumulating backlog and an increase in unfinished work.

The situation at the end of 2017 was in stark contrast with the stagnation or slight contraction the PMI data described only a year and a half ago.

"It's a really strong growth story that nobody really foresaw earlier in the year," Williamson said.

Rock-bottom interest rates brought about by the ECB's bond-buying program, a pick-up in growth among France's main trading partners and tax cuts for companies have helped pull the French economy out of its rut.

The election of pro-business President Emmanuel Macron in May, who wasted no time in passing a wide-ranging reform of labor market rules, also pushed business and consumer confidence to multi-year highs.

"It just goes to show how a bit of political confidence aligned with all the economic stimulus has just turned the French economy around," Williamson said.

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(Reporting by Michel Rose; Editing by Leigh Thomas and Hugh; Lawson; michel.rose@thomsonreuters.com; +33149495071; Reuters; Messaging: Twitter: https://twitter.com/MichelReuters)