PARIS, June 21 (Reuters) - France's services sector contracted more than expected in June, a survey showed on Friday, dragged down by weak demand as the euro zone's second-biggest economy heads into snap parliamentary elections.
Financial investors are closely watching France's economic performance as political uncertainty, marked by a yield surge for France's sovereign debt, has added to worries Paris may run into trouble financing its budget deficit.
The HCOB flash purchasing managers index for the services sector, compiled by S&P Global, fell to 48.8 from a final reading of 49.3 points in May, well below a 50-point forecast from a panel of analysts polled by Reuters.
Any figure below 50 marks a contraction, while above 50 shows an expansion in activity.
"The uncertainty of the upcoming elections has French businesses stalling and fearing tougher times," said HCOB economist Norman Liebke, adding output expectations for the coming twelve months have weakened.
New business intake in the services sector fell to 46.4, the worst reading in five months.
The flash composite PMI, which comprises both services and manufacturing, fell to 48.2 from 48.9 points the previous month.
President Emmanuel Macron's centrist alliance, lagging in the polls, seeks to cast itself as a bulwark of prudent economic management protecting the nation from profligate extremists on both flanks.
Prime Minister Gabriel Attal said on Thursday he would lower power bills, soften inheritance tax and link pensions to inflation if it wins the two-round ballot on June 30 and July 7. (Reporting by Tassilo Hummel Editing by Christina Fincher)
