We all knew that the boost in August was largely a one-off due to the Olympics but since then, it’s been a stark decline for French business activity as a whole. The services sector is seen slumping hard in November with the reading being a 10-month low as demand conditions continue to struggle. The manufacturing sector eased further as well, also matching a 10-month low. These are tough times for Europe’s second largest economy. HCOB notes that:
“The French economy is being rocked by uncertainties. The HCOB Flash Composite PMI for November starkly reveals that
businesses are heavily impacted by crises both domestically and internationally. Particularly alarming is the outlook for the
future. 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 collapsing, which could
jeopardize efforts to reach a budget agreement. This is not a good signal for private consumption and investment decisions.
“The French industrial sector faces significant challenges. As the year draws to a close, November’s manufacturing output
index has plummeted to a 2024 low. According to surveyed companies, the automotive, construction, and cosmetics sectors
are particularly struggling. Factory order intakes are shrinking both domestically and internationally. Additionally, despite a
marked weakness in demand, manufacturers’ input prices have risen strongly compared to the previous month, while their
output prices fell. Understandably, factory workforce reductions continued in November. What glimmer of hope should
French industrialists hold onto to remain optimistic?
“The service sector is shrinking. French service providers are facing the same bleak outlook as the industrial sector. Survey
participants reported that the drop in demand reflected current political and geopolitical uncertainties. Given the escalating
political crisis in Paris and the ongoing war between Russia and Ukraine, it is hardly surprising that the index for future
activity plummeted to the neutral level of 50.0, signalling expectations of stagnation in the service sector. The only silver
lining is that service providers are still creating new jobs. A small glimmer of hope in otherwise dark times.”
This article was written by Justin Low at www.forexlive.com.
