- Prior 50.1
- Manufacturing PMI 51.0 vs 50.5 expected
- Prior 50.7
- Composite PMI 48.6 vs 50.0 expected
- Prior 50.0
With a start to the year like this, France is not beating the allegations that it will be the main drag of the euro area for 2026. While political woes are a key issue, the French economy looks to also be stuttering to start the new year.
Of note, services activity falls back into contraction territory and marks a fresh 9-month low. That isn’t enough to offset the better news on the manufacturing side of things with the estimate there being a 43-month high. That comes as the manufacturing output index climbs to 51.9, marking a 47-month high.
Looking at the details, demand conditions continue to be weak and clients are showing hesitancy to place orders amid the ongoing political
deadlock regarding the nation’s fiscal plans. That being said, business optimism was the highest since September 2024 so that may hint that there might be better things to come in the French economy moving forward. But for now, it’s very much a wait and see kind of thing.
HCOB notes that:
“The French private sector entered the new year on a muted note. The HCOB Flash PMIs point to a broad‑based softening
in export conditions, reflecting continued uncertainty on the trade policy front despite prior trade agreements. Renewed tariff
threats from the US, which included the prospect of a 200% duty on French champagne, underscore how fragile the external
environment remains. Although such threats may merely be being used as a tool to gain political leverage, they still add to
the uncertainty faced by export‑orientated firms. A relatively firm euro and intensifying competition from China further weigh
on the outlook for exporters.
“Nonetheless, the HCOB flash PMIs showed a modest improvement in manufacturing, whereas activity in the services
sector weakened notably at the start of the year. The prospect of a resolution over the 2026 national budget offers some
relief, as it reduces the risk of a renewed political crisis in the near term. This has contributed to a marked rise in the future
activity index. However, the new budget is unlikely to deliver sufficient progress on fiscal consolidation.
“Whether the manufacturing industry embarks on a recovery in 2026 remains uncertain. The headline PMI for the sector
signalled a mild uptick in growth, but a more durable improvement would require a clear rebound in new orders, which
remained in contraction in January. The continued decline in output prices and export orders also suggests that a sustained
upswing in growth is not yet in sight.”
This article was written by Justin Low at investinglive.com.