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France's economy is weakening again

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(Globalpost/GlobalPost)

France's economy is weakening again, a survey of leading indicators suggested on Thursday, just a week after the country boasted a return to growth in the second quarter.

The new cloud of concern comes as Markit Economics released its monthly Composite Purchasing Managers' Index for the eurozone, showing that while activity in the 17-member currency bloc picked up sharply in August, it actually fell in France, to 47.9 points from 49.1 points.

The forward-looking data showed that PMI for the French manufacturing sector dropped to its lowest point in two months, from 51.4 points to 48.6 points. And for the services sector, activity slipped to 47.7 points, also from 48.6 points.

A reading above 50 points suggests expansion while under 50 points indicates contraction.

"A big question mark still hangs over France's ability to return to sustained growth," Markit chief economist Chris Williamson said of the compiled eurozone data, noting that French domestic demand is "lacklustre".

Last week, however, data from the INSEE national statistics agency showed that France had exited from an 18-month long recession after better-than-expected growth of 0.5 percent in the second quarter.

The pick-up was further supported by provisional estimates from the OECD on Thursday, which said France rallied to growth of 0.5 percent in the second quarter from a previous contraction of 0.2 percent in the first quarter.

One of France's main concerns is the country's high taxes, which critics say have now reached a breaking point, although the government has refused to rule out further increases to meet its EU obligations to reduce its public deficit.

On Thursday, Foreign Minister Laurent Fabius warned President Francois Hollande to be "very, very careful", saying "there's a level above which we shouldn't climb".

Julien Dray, a local spokesman for Hollande's Socialist Party, said there was a "limit" to how far you can go, "because the fiscal system gives the sentiment that those that work and invest don't do anything else but to pay taxes".

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http://www.globalpost.com/dispatch/news/afp/130822/frances-economy-weakening-again