French services sector shrinks at fastest pace in 5.5 years

France's services sector saw a significant downturn in May, contracting at the fastest pace recorded in five-and-a-half years. Both business activity and new orders declined sharply, attributed to increasing inflationary pressures and geopolitical uncertainty, which are negatively impacting business sentiment and raising concerns about a potential recession. In parallel, construction activity across the Eurozone also contracted in May. This decline is largely attributed to persistent supply chain issues that continue to pose a significant challenge to the sector's recovery efforts. Globally, the World Trade Organization (WTO) indicates that global merchandise trade growth may be slowing. The WTO's Goods Trade Barometer index has fallen to 101.7, although it remains above the baseline of 100, suggesting that trade volumes are still trending upwards. Disruptions stemming from the conflict in the Middle East have impacted trade, but this has been partially counteracted by strong demand for electronic components associated with artificial intelligence. Regarding public finances, France's budget deficit reached €69.6 billion by the end of April. This figure represents a slight increase compared to the €69.3 billion recorded in the same period of the previous year. The deficit had widened from €42.9 billion in the preceding period.