French business activity has contracted at the fastest rate in over five years, increasing the risk of a recession

The increase in energy prices has affected consumers and businesses, and French business activities have shrunk at the fastest rate in five and a half years.

Bloomberg reported on Thursday (May 21st) that according to the latest data from S&P Global, the French Composite Purchasing Managers' Index (PMI) for May dropped to 43.5, compared to 47.6 in April. This is the fifth consecutive month below the 50-point threshold that separates expansion from contraction.

S&P stated that both the manufacturing and service indices in France have dropped significantly. Businesses are complaining that the situation in Iran has pushed up fuel and energy costs and has caused broader economic anxiety.

France is the second-largest economy in the Eurozone. Hayes, the chief economist of S&P Global Market Intelligence, said that this shock has substantially increased the risk of a recession in the French economy.

What is worrying is that the general increase in the overall price level in the economy will increase the likelihood of further contraction in demand.

The French central bank indicated this month that the resilience of the French economy "is beginning to face tests", and refused to make a forecast for this quarter. In the first three months of this year, the French economy unexpectedly stagnated and the unemployment rate unexpectedly rose to its highest level in five years.