France October flash services PMI 48.3 vs 49.9 expected

• Prior 49.6
• Manufacturing PMI 44.5 vs 44.9 expected
• Prior 44.6
• Composite PMI 47.3 vs 49.0 expected
• Prior 48.6

The post-Olympic blues is continuing for France and this just reaffirms that underlying conditions remain poor to start Q4. Both services and manufacturing prints were a miss on estimates with the former definitely hurting more. Adding to the likelihood of the ECB stepping up the pace of the easing cycle is that the rate of input price inflation falling to its weakest in nearly four years.

EUR/USD is dragged lower, down from 1.0787 to 1.0773 currently. HCOB notes that:

“France remains trapped in economic decline as the fourth quarter begins, with the challenges from the third quarter
persisting. The HCOB Flash PMI for October stands at 47.3 points, clearly indicating a contracting economy. Despite early
elections four months ago, uncertainty continues to loom over the economic outlook. Prime Minister Michel Barnier is facing
a fragile political situation, and the 2025 budget remains unresolved, further undermining business confidence. A clear
strategy to tackle the ongoing deficit and debt issues is still lacking. The HCOB Nowcast predicts only slight growth as the
fourth quarter kicks off. Pressure is mounting on the government in Paris to take urgent measures to stabilise the economy
and address fiscal imbalances.

“The French industrial sector remains mired in a deep crisis. The HCOB Flash Manufacturing PMI for October stands at 44.5
points, confirming the ongoing downturn. A small silver lining amid the prolonged weakness is the beginning of a decline in
input prices, though demand has been contracting for some time. However, the outlook at the start of the fourth quarter
remains bleak. Both domestic and international order volumes show no signs of recovery. Particularly worrying is the further
drop in expected output for the next twelve months. The industry could benefit from greater political stability in Paris and
targeted investments to support the much-needed recovery.

“The French services sector continues to face tough conditions in October. The HCOB Flash PMI remains in contraction
territory at 48.3 points, signalling ongoing weakness in services activity. Despite this sluggish performance, input prices rose,
maintaining pressure on company costs. The outlook is mixed: in the short term, conditions are expected to worsen as both
domestic and international orders remain weak, and employment levels decline. However, there is a glimmer of hope as
business expectations for the next twelve months remain optimistic, suggesting the potential for a longer-term recovery in
the sector.”

This article was written by Justin Low at www.forexlive.com.