France services activity contracts at fastest pace since May in October PMI

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France services activity contracts

Highlights

France Services PMI fell to 46.2 in October from 51.2 in September, the fastest contraction since May and below the flash estimate of 48.4.
France Composite PMI, covering services and manufacturing, dropped to 46.6 from 51.1, indicating sharpest activity decline since May and undershooting the flash reading of 48.4.
Protests and rising government bond yields drove a slump in domestic demand, with French consumer confidence at its lowest since June 2013, pointing to strained near-term spending.

October PMI data points to weaker demand

As reported by Reuters, citing S&P Global, the France Services PMI Business Activity Index falls to 46.2 in October from 51.2 in September, moving below the 50-point threshold that separates growth from contraction.

The final October reading is also weaker than the flash estimate of 48.4. S&P Global's France Composite PMI, which includes services and manufacturing, declines to 46.6 from 51.1, also marking the fastest drop in activity since May and coming in below the flash composite reading of 48.4.

A reading above 50 indicates expansion, while a figure below 50 signals contraction. The latest survey suggests the slowdown in services is a significant driver of the broader weakening in French private-sector activity.

Protests and market pressure weigh on outlook

The survey indicates that protests in the euro zone's second-biggest economy contribute to a drop-off in domestic demand, adding pressure on orders and business conditions.

Joe Hayes, senior principal economist at S&P Global Market Intelligence, says there are reports of stalled domestic demand and investment activity in October as clients put decisions on hold. He adds that, against a backdrop of social unrest and rising government bond yields, both activity levels and new business in the services sector fall at the fastest rates since May.

Separate data released last month by official statistics agency INSEE shows French consumer confidence falls to its lowest level since June 2013, also affected by the demonstrations. That backdrop points to broader strain on household sentiment and near-term spending conditions in France.

France’s efforts to rein in its budget deficit and reassure investors have come into focus as political turbulence and higher borrowing costs keep pressure on public finances. Our earlier article explained how worries over budget approval and fiscal targets pushed French government bond yields higher, raising broader concerns about market stress and spillovers across French assets.

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