French services sector sees strongest growth since May 2022, PMI shows

PARIS (Reuters) - France's services sector experienced its most robust expansion in over two years in August, boosted by the Olympics and a modest rise in demand, a business survey showed on Wednesday.

The HCOB France Services PMI Index jumped to 55.0 in August from 50.1 in July, marking the largest upswing in over three years and the highest level since May 2022. Any reading above 50.0 indicates growth in activity.

Economist Norman Liebke at Hamburg Commercial Bank attributed the surge to the Olympic Games. "This is no sustainable level," Liebke said. "The one-time boost is not evident in other PMI sub-indices, as only business activity and new orders showed significant improvement."

Despite the overall growth, the pace of job creation slowed for the fourth consecutive month, with the employment subindex slipping back towards the neutral threshold.

Input cost inflation eased to a 39-month low, yet service providers raised their charges more aggressively, with output price inflation accelerating compared with July. "Wages remain the main source of cost inflation," Liebke added.

New business inflows partially recovered in August after declines in June and July. The rise in new orders was primarily domestically-driven, as new business from foreign customers decreased for the sixth consecutive month.

Business confidence remained subdued, with political uncertainty dampening optimism. Backlogs of work decreased at the fastest rate since January, indicating less strain on firms' capacity.

The HCOB France Composite PMI Index, which includes both manufacturing and services, rose to 53.1 in August from 49.1 in July, driven exclusively by the services sector's strong performance.

(Reporting by Tassilo Hummel; Editing by Hugh Lawson)