- Prior 50.1
- Composite PMI 49.1 vs 48.6 prelim
- Prior 50.0
The headline reading is better than the initial estimate but still points to a first contraction in three months for France’s services sector. Of note, new business is seen declining at its fastest pace in six months. The good news at least is that employment conditions are seen holding up while firms’ expectations for growth in the year ahead were the most upbeat since September last year.
HCOB notes that:
“France’s private sector economy currently presents a diverging picture. Manufacturing has shown tentative signs of gradual
recovery in recent months, while the service sector entered the new year on a softer footing, reflected in a cooling of activity.
As a result, the composite index has slipped back below the growth threshold, due to the heavier weight of services in the
overall economy.
“At the start of the year, France’s service sector experienced a fresh setback. Order books were notably sparse, with clients
displaying caution. Against this backdrop, it is all the more noteworthy that forward‑looking business expectations have risen
significantly. This optimism appears to rest on the assumption that a resolution to the protracted budget deadlock will help
reduce uncertainty, thereby supporting both consumption and investment momentum.
“Labour market prospects in the French service sector appear to be broadly balanced. Survey data have pointed to a
modest recovery in hiring throughout the second half of 2025, though simultaneous reports of diminishing work backlogs
suggest this trend could be a fragile one. Should new business continue to fall short, the labour market outlook could
become more challenging over the coming months.
“Price dynamics in the French services sector remain modest for the time being. Where feasible, firms are attempting to
pass higher costs, which are predominantly wage‑related, on to customers in an effort to preserve margins. Overall, cost
pressures are below their historical average, indicating that no meaningful inflationary impulse appears to be building in the
service sector at present.”
This article was written by Justin Low at investinglive.com.