(Aug 21): France’s private sector unexpectedly weakened this month as extreme summer temperatures took a toll on the services sector.

S&P Global’s Composite Purchasing Managers’ Index (PMI) declined to 48.8 in August from 49.4 the previous month — remaining below the 50 mark separating expansion from contraction for an eighth month. Analysts polled by Bloomberg had anticipated a small increase to 49.5.

Services retreated more than anticipated, to 48.4. Manufacturing, by contrast, jumped back into growth territory, with inflation in the goods-producing sector remaining on a downward trajectory.

“The flash PMI report revealed another month of frail economic conditions, with some firms, mainly in the service sector, highlighting the extreme heat as a reason for lower activity and demand,” Joe Hayes, principal economist at S&P Global Market Intelligence, said on Friday in a statement. “There was some renewed vigour in the manufacturing sector, however, as production rose for the first time since April’s stockpile-driven boost.”

France’s economy has recovered from an early-year wobble to register growth of 0.2% in the second quarter, a pace the central bank reckons will be matched in the third. But that prediction relies in part on strength in the services sector, which Friday’s surveys throw into doubt.

Labour Minister Jean-Pierre Farandou, meanwhile, has blamed heat waves and the Iran war for an advance in the unemployment rate to 8.3%, the highest in almost six years. A further headwind is likely to come in the form of tighter monetary policy, with markets expecting another hike in interest rates from the European Central Bank in September.

The longstanding issue of France’s strained public finances is set to return, too, as the country’s minority government tries to push a cost-cutting budget through a fractured parliament.

PMIs are closely watched by markets as they arrive early in the month and are good at revealing trends and turning points in an economy. A measure of breadth of changes in output rather than depth, business surveys can sometimes be difficult to map directly to quarterly GDP.

Eurozone PMI data will arrive later on Friday.

A separate indicator of business confidence from French statistics agency Insee rose one point to 98 in August, marking the third consecutive month of improvement. The services and retail sectors continued to pick up while the closely watched gauge for industry rose two points to 103 — the highest level since January. The long-term average for the measures is 100.

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