France services sector activity declines in September amid demand woes

Investing.com -- France’s services sector activity contracted at a faster pace in September, as demand conditions deteriorated amid political uncertainty, according to the latest HCOB France Services PMI data.

The HCOB France Services PMI Business Activity Index fell to 48.5 in September from 49.8 in August, moving deeper into contraction territory. Any reading below 50 indicates a decline in activity.

Survey respondents cited client hesitancy, increased uncertainty, and challenging sales conditions as key factors behind the decline. New business volumes decreased for the thirteenth consecutive month, though the rate of decline was the slowest since January.

The HCOB France Composite PMI Output Index, which measures activity across both manufacturing and services sectors, dropped to a five-month low of 48.1 in September from 49.8 in August, indicating a quicker reduction in private sector business activity.

"French politics is currently offering little support to businesses, as the ongoing political deadlock adds to uncertainty and undermines confidence," said Jonas Feldhusen, Junior Economist at Hamburg Commercial Bank.

Foreign demand for French services continued to contract, with new business from abroad declining at a solid pace, though slower than August’s year-to-date record.

Despite the challenging business environment, employment remained a bright spot as service providers increased their workforce numbers for the second consecutive month, primarily through expansions in sales departments. However, the rate of job creation slowed to a marginal pace.

Price trends showed operating expenses continuing to rise due to higher supplier fees and wage bills, though at a relatively muted rate compared to historical averages. Meanwhile, service providers reduced their prices charged for the first time since May, citing competitive pressures.

Business confidence improved to a three-month high in September, with firms expecting stronger demand conditions following the introduction of new offerings. However, sentiment remained subdued compared to historical averages, with political uncertainty weighing on outlook.

The manufacturing sector experienced a steeper decline in output than services, with both sectors seeing faster reductions in activity compared to August.

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