Shrinkage of French business activity slows down

French business activity shrank further in July, but at the slowest pace for 17 months, a closely watched indicator from survey firm Markit showed on Monday.

The sluggish French economy, which again fell into recession in the first quarter of this year, is under close scrutiny on financial markets and in European Union political circles, since it is the second-biggest economy in the eurozone after the German economy.

But despite a record-high 3.26 million unemployed, French President Francois Hollande said last month said that the recovery of the country's economy had already started.

The Markit composite Purchasing Managers Index (PMI) of overall activity, an important leading indicator of economic activity, came in at 49.1 for July, up from 47.4 in June. For the services sector, it came to 48.6 from 47.2.

"Composite data from the survey shows only a marginal contraction in activity in the French private sector in July, the slowest since the start of the contraction phase that began 17 months ago," Markit said in a statement.

The French index however still remains below the 50 point mark, indicating activity is still on the decline and lower than the eurozone average.