Data collected from 12-20 November The French private sector recorded a third consecutive monthly decline in business activity levels in the middle of the final quarter of the year, with the contraction accelerating to its fastest pace since January. Weak demand was a common theme seen across business anecdotal responses during November – with both business customers and households reported to have reduced their interest in French goods and services – and the latest data showed new order volumes contracting at the fastest pace in four years. Notably, for the first time since May 2020, French companies surveyed posted negative expectations for activity over the next 12 months.
One positive from November’s “flash” figures was a renewed rise in private sector hiring. However, there was an intensification of cost pressures, with input prices rising to their highest level in three months.
The headline HCOB Flash France Composite Output PMI fell markedly in November to 44.8, from 48.1 in October. Not only was this below the critical 50.0 threshold, and thus marking a third straight monthly decline in private sector output, it also signaled the sharpest contraction since January. By sector, the HCOB flash figures revealed deepening declines in both manufacturers and service providers in the middle of the fourth quarter. The sharp decline in factory output (which was the sharpest of the year so far) reportedly reflected a myriad of factors. Manufacturers cited the automotive, construction and cosmetics industries as drags, as well as weakness in international markets. Respondents from the services sector pointed to political and economic uncertainty, with customers reportedly reluctant to spend. The decline in services activity was the fastest since January.
New orders contracted by the largest margin
The level of new incoming work received by private sector companies in France fell deeper in November. New orders contracted by the largest margin in exactly four years amid a broad-based deterioration in industry-wide sales performance. Demand conditions were negatively impacted by a significant drop in new work from abroad, as evidenced by the fastest decline in new export work since May 2020. Respondents in November cited geopolitical uncertainty and weaker order flows from the United States.
The sharp decline in new orders led French companies to direct more resources towards completing backlogs of work. Outstanding work volumes subsequently fell for the 16th consecutive month during the latest survey period. Moreover, the pace of depletion was the fastest in four years
with both manufacturers and service providers recording larger reductions in outstanding orders. French firms are expected to continue the contractionary trend in activity through 2025.
with forecasts for output over the next 12 months down for the first time since May 2020. Prolonged weakness in demand has often been cited as one of the reasons for the slowdown in growth.
The evidence suggests there is reason to be pessimistic about the outlook. The negative sentiment has been driven by uncertainty, particularly regarding broader economic conditions, business closures and challenges in specific industries such as automotive and construction.
However, after a slight contraction in October, HCOB’s “fast” PMI data showed a renewed uptick in private sector employment across France, with the strongest job creation rate for six months. However, hiring was limited to services firms only.
On the price front, November saw cost pressures intensify across France. Operating expenses rose at the fastest pace for three months, but the pace of inflation was muted compared to the series average.
The French economy is being shaken by uncertainty
On the flash PMI data, the economist said: The French economy is being shaken by uncertainty. The Hamburg Commerzbank composite flash PMI for November clearly shows that companies are being hit hard by crises at the domestic and international levels.
The outlook for the future is particularly worrying. Politically, there is no sign of relief given the deadlock over the country’s 2025 budget.
which remains unresolved due to internal political disputes. Now even Prime Minister Michel Barnier’s government is at risk of collapse.
which could jeopardize efforts to reach a budget agreement. This is not a good sign for private consumption and investment decisions.
The French industrial sector is facing major challenges. As the year draws to a close, the November industrial output index fell to its lowest level in 2024. According to the companies surveyed, the automotive, construction and cosmetics sectors are suffering particularly. “Factory orders have contracted both domestically and internationally.
In addition, despite the marked weakness in demand, manufacturers’ input prices have risen strongly compared to the previous month, while their output prices have fallen. It is understandable that factory workforce cuts will continue in November. What is the silver lining that French manufacturers should cling to in order to remain optimistic?
“The services sector is shrinking. French service providers face the same bleak outlook as the industrial sector. Survey respondents said that the decline in demand reflects the current political and geopolitical uncertainty. Given the escalating political crisis in Paris and the ongoing war between Russia and Ukraine, it is not surprising that the Future Activity Index fell to the neutral level of 50.0, indicating expectations of stagnation in the services sector. The only hope is that service providers are still creating new jobs. This is a small ray of hope in dark times.”
