France increased its dependence on the service sector for economic growth this month, as factories grappled with issues including the coronavirus outbreak and the discontinuation of Boeing's 737 Max airplane.

While a Purchasing Managers Index from IHS Markit showed an unexpected pickup in overall momentum in February, manufacturing returned to contraction.

The data highlight the euro zone's split economy. European Central Bank Vice President Luis de Guindos said on Thursday that the strong labor market is bolstering domestic consumption and fending off global weakness. The worry is how long that can last.

France's composite PMI climbed to 51.9, beating economists forecasts. A gauge for manufacturing slipped below 50, signaling a contraction for the first time since the middle of last year.

Industrial orders were hit particularly hard by a drop in international demand. A pause in Boeing's production of its single-aisle jet following two fatal crashes has come as a shock to French suppliers.

In addition, the coronavirus outbreak in China has forced many businesses to shutter their operations in the country.

The report showed French companies are still optimistic over the next 12 months, supported by plans for new product launches expectations for a demand pickup.

Markit will publish PMIs for Germany and the euro area later this morning, with both forecast to show a slight deterioration in February.

Source : Bloomberg