France business activity contracts in October as political and financial strains deepen

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France business activity contracts

Highlights

France's flash composite PMI drops to 48.4 in October from 51.1 in September, signaling a sharp contraction below the 50-point threshold.
Flash services PMI falls to 48.4 and flash manufacturing PMI to 49.3 in October, both missing Reuters poll forecasts and reversing September gains.
Survey sentiment indicator for the next 12 months hits a six-and-a-half-year low, as rising political uncertainty and higher borrowing costs cloud France's economic outlook.

PMI survey signals broad-based October slowdown

As reported by Reuters, citing S&P Global, its flash October survey shows French business activity falling back below the 50-point threshold that separates growth from contraction, with companies linking the decline in demand to heightened political uncertainty and economic pressure.

The flash services PMI falls to 48.4 in October from 51.2 in September, missing a Reuters poll forecast of 50.7. The flash manufacturing PMI declines to 49.3 from 50.6, also below the 50.5 forecast.

The composite flash PMI, which combines services and manufacturing, drops to 48.4 from 51.1 in September. That reading also comes in below the Reuters poll forecast of 50.5, pointing to a rapid reversal after September's rebound.

Political uncertainty and borrowing costs weigh on outlook

Joe Hayes, senior principal economist at S&P Global Market Intelligence, says September's recovery proves short-lived as financial conditions tighten rapidly and political pressure rises further across France during October.

He adds that the October figures could be a prelude to further weakness, with the survey's sentiment indicator for the next 12 months sinking to a six-and-a-half-year low. The reading reflects concern over what firms see as a highly uncertain 2027 presidential election, adding to existing worries about France's fiscal position.

French government borrowing costs have jumped in recent weeks as investors question the country's ability to repair its finances. At the same time, waves of street protests are raising the political temperature ahead of the presidential vote in the spring.

We previously reported on France’s efforts to reassure investors as political turbulence and higher borrowing costs put the country’s public finances under pressure. Our earlier article outlined the government’s plan to bring the budget deficit back toward 3% of GDP by 2029, while warning that elevated OAT yields and budget uncertainty were fueling market stress that spilled from bonds into French equities.

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