France’s private sector registered its first month of expansion since April during August, latest HCOB PMI® survey data revealed, with the overall pace of growth at its quickest since March 2023 as a strong upturn in services activity propelled the broader economy. This came despite an intensification of manufacturing malaise, as factory orders fell at the steepest pace in over four years. Indeed, aside from the headline index’s improvement, August PMI data highlighted fragility across France’s economy. Private sector employment decreased for the first time since January, while overall new business also shrank.
Expectations for growth over the next 12 months also slipped to their weakest in almost a year. The headline HCOB Flash France Composite PMI Output Index rose by over three points in August to 52.7, from 49.1 in July. Notably, this marked the first time since April that the index has posted above 50.0 and therefore in territory indicative of business activity growth. August’s expansion was relatively sold overall and broadly in line with the survey’s long-run average.
In addition, the increase in output signalled by the headline figure was the strongest since March 2023. Sector data showed the uplift in private sector output was exclusively driven by services. Activity at French service providers grew markedly and at the fastest pace in over two years. Greater customer numbers were frequently cited as a reason for increased output, anecdotal evidence showed. Moreover, the expansion in services was more than enough to offset a deeper decline in manufacturing production. Factory output decreased at the fastest pace since January amid the most rapid deterioration in demand for French goods since May 2020.
A renewed rise in demand for French services – that was also the quickest in 16 months – could only dampen the impact of France’s factory order contraction. As such, total new business intakes across the French private sector declined for a third successive month in August. The decrease was marginal, however.
Backlogs of work were depleted further midway through the third quarter of the year, with both sectors recording lower levels of outstanding business. Quicker declines were seen at both manufacturers and service providers, leading to the fastest combined pace of decrease for seven months. Subdued demand conditions enabled businesses to clear backlogs of work more efficiently, qualitative responses from panellists showed.
After a six-month spell of job creation, net private sector employment in France declined during August. Lower staffing capacity was a result of job shedding in manufacturing, more detailed data showed, as factory workforce numbers were reduced at the fastest pace in over four years. Although services employment rose, it did so only marginally and to the weakest extent since
January
French private sector companies’ expectations for output in the coming 12 months remained positive on balance, although the level of optimism weakened in August to its lowest in just shy of a year. The outlook differed by sector, with manufacturers at their most pessimistic since October 2023. Service providers retained expectations for activity growth, although the level of positive sentiment slipped to a nine-month low. Political uncertainty, challenging conditions in the real estate industry and high interest rates were cited by firms as reasons to be downbeat.
Cost pressures across the French private sector cooled in August. After quickening in July to an eight-month high, the rate of input price inflation eased to a three-and-a-half-year low. Both sectors recorded softer increases in their costs, although manufacturers continued to see more intense price pressures than their services counterparts. While input cost inflation cooled, prices charged for French goods and services rose at a stronger pace midway through the third quarter. The increase in output charges was the fastest since January.
Source: S%P GLOBAL
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