• Prior 47.1
  • Manufacturing PMI 46.4 vs 45.0 expected
  • Prior 45.1
  • Composite PMI 46.6 vs 47.5 expected
  • Prior 46.6

The fall in services sector is the thing to note here, with the headline reading being a 30-month low. In the context of the French economy, that matters more than the slight improvement in manufacturing fortunes on the month. All this just continues to point to a persistent contraction in the economy during Q3 and that raises further the risks of a recession later this year. HCOB notes that:

“The French economy is stuck in a rut, showing signs of struggle once again. For the third month straight, we've seen Europe's second-largest economy shrinking, as indicated by the HCOB PMIs. Despite hopes of a positive economic outlook, the latest PMI data is throwing a curveball, hinting that we might be headed for a contraction in the third quarter.

“The global weakness in demand is making itself felt in France. The HCOB PMI for new orders from abroad remains well below the expansion threshold of 50, but also new orders overall continued to deteriorate, which is why companies turned to backlogs of work to sustain activity wherever possible.

“The ongoing weakness of the French economy is also reflected in the employment situation. Although employment increased again, it did so at the slowest pace since January 2021. Nevertheless, it currently looks like the lowest unemployment rate in over 40 years could be reached in the third quarter. In addition, employment growth came exclusively from service companies. Should the situation in the service sector deteriorate further, a higher unemployment rate may follow.

“The discrepancy in prices between the sectors is still pronounced. In the services sector, input prices have again risen strongly due to higher wage growth. In contrast, manufacturing input prices fell for the fourth month in a row amid lower energy and raw material costs. In the case of output prices, a similar trend is showing, but this is not good for the inflation outlook as it suggests the core rate, where service prices play a crucial role, could prove to be stubborn.”