After rising to 53.1 in August, the HCOB Flash France PMI fell to 47.4 in September, its lowest level since January. Activity in the private sector fell, signalling a fresh contraction at the end of Q3. Manufacturing output fell rapidly, driven by services, which fell again after August’s growth. Customer numbers fell as the Olympics approached, weighing on consumption. New orders fell sharply at the end of Q3, particularly in manufacturing, as interest from overseas markets waned. The sub-index for arrears of work fell into contraction territory, with work pending falling. Business confidence, however, rose in September, with growth forecasts upbeat until 2025, but divergence between sectors persisted.
French HCOB Flash France PMI signals post-Olympic recession in September. The headline results show the HCOB Flash France index at 47.4, its lowest in 8 months, while the services sector was at 48.3. The manufacturing index was at 42.8, also its lowest in 8 months. After a strong growth in August, the French economy slowed again at the end of the third quarter. Business activity fell rapidly, with new orders falling due to a slowing market and fewer customers. Backlogs of work fell at the fastest pace since November, although employment grew slightly. September data also showed an easing in cost pressures, with the weakest rise in input prices in four years.
Growing optimism supported hiring activity across France in September. After falling slightly in August, employment levels rose slightly in the latest survey period. Job creation was once again limited to the services sector as factory staff numbers were cut.
Manufacturing employment falls sharply
The decline in manufacturing employment slowed sharply, and was the least pronounced since May. In some cases, staff numbers were raised in anticipation of higher activity. HCOB PMI survey data pointed to a significant easing in cost pressures across France in September. The overall rate of input price inflation slowed to a 46-month low, with both manufacturers and service providers seeing an easing in cost pressures. With margin pressures easing, French companies offered discounts for the first time since February 2021. The price cuts were exclusive to the services sector, although factory gate fees remained largely unchanged since August.
Commercial Bank of Hamburg economist, commenting on the spot PMI data, said that the strong growth in the French economy had evaporated by September, with the index falling to 47.4, confirming that August’s rise was an Olympic-related anomaly. The manufacturing sector remains difficult, with growth expected to be almost flat in the third quarter, putting France on track to join the eurozone economies facing challenges. He added that there was deep disappointment in the services sector, with the index falling to 48.3. New orders and backlogs of work were hit hard, despite stable employment levels and easing price pressures. While service providers remain cautiously optimistic, optimism is below the historical average.
In the manufacturing sector, the HCOB index showed a slight improvement to 44.0, but remains in recession territory, as new orders continue to fall and employment continues to decline. The situation remains bleak, with no optimism among industrial companies due to weak demand from key markets. Politically, post-election instability continues, hampering the economic reforms needed to revive the industry.
Final September data on October 1
Final data for September are published on October 1 for manufacturing and October 3 for services and composite indices. The HCOB France Purchasing Managers’ Index (PMI) is produced by S&P Global and is based on survey data collected from around 750 companies representing the French manufacturing and services sectors. The preliminary estimate is based on around 85% of total responses and is intended to provide an accurate advance indication of the final data. The average differences between the preliminary and final (final minus flash) index values since the start of comparisons in January 2006 show that the absolute differences better reflect the true variance, while the average differences provide a better indication of any bias. The PMI® survey methodology has gained an excellent reputation as a modern tool for monitoring the state of the private sector economy, tracking variables such as sales, employment, inventories and prices. These indicators are widely used by businesses, governments and economic analysts to help them understand business conditions and guide corporate and investment strategies. Central banks, including the European Central Bank, use the data in making interest rate decisions. PMI® surveys are the first economic indicators to be published monthly, making them available before government data.
The composite output index is a weighted average of the industrial output index and the service business activity index. The service business activity index is based on the question “Is the level of business activity in your company higher, the same or lower than it was a month ago?” The manufacturing PMI is a composite based on five survey variables: new orders (0.3), output (0.25), employment (0.2), suppliers’ delivery times (0.15), and inventories of purchased materials (0.1), with the delivery times index being inverted.
