French business activity falls at quickest pace since February

Investing.com -- French business activity declined at its fastest rate since February, with the HCOB Flash France Composite PMI Output Index dropping to 46.8 in October from 48.1 in September.

The latest data marks the 14th consecutive month of contraction in France’s private sector economy, with both manufacturing and services sectors experiencing steeper declines in output.

According to survey respondents, weak client demand and subdued domestic economic conditions constrained activity levels. New orders fell for nearly a year-and-a-half, with the reduction intensifying in October. Some panel members attributed reduced client spending to the volatile domestic political situation.

Despite the downturn, employment continued to grow for the third consecutive month, with job creation observed in both manufacturing and services sectors. However, the overall rate of expansion remained marginal, with many manufacturers reportedly hiring staff on temporary contracts.

"The subdued trend in France’s private sector persists," said Jonas Feldhusen, Junior Economist at Hamburg Commercial Bank. "The Flash Composite PMI for October fell to 46.8, indicating a continued and stronger contraction in overall economic activity."

Feldhusen noted that HCOB’s in-house nowcasting model predicts zero growth for the third quarter. He added that while Prime Minister Sébastien Lecornu gained short-term political leeway for budget negotiations by suspending pension reform, "the overall economic and political climate remains tense."

Business expectations softened to their weakest level since July, though firms remained optimistic overall about activity growth over the coming 12 months. Positive sentiment came entirely from the service sector, as manufacturers forecast a decrease in production levels.

Cost pressures continued to cool, with the rate of input cost inflation reaching its softest level since November 2020. Meanwhile, prices charged increased marginally after falling in September.

The data was collected between October 9-22, with final October figures scheduled for publication on November 3 for manufacturing and November 5 for services and composite indicators.

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