France February flash services PMI 44.5 vs 48.9 expected

• Prior 48.2
• Manufacturing PMI 45.5 vs 45.5 expected
• Prior 45.0
• Composite PMI 44.5 vs 48.0 expected
• Prior 47.6

That’s a real awful set of readings with both the services and composite ones being 17-month lows. It reaffirms that the French economy is sliding deeper into contraction territory at the start of this year as weaker demand conditions continue to be the main drag. Meanwhile, employment conditions also suffered as firms reduced workforce numbers by the most since August 2020. Ouch. HCOB notes that:

“Recession with no end in sight. The HCOB French Flash PMI in February failed to provide any relief, with the headline
Composite Output Index plunging over three points to signal its deepest contraction since September 2023. Surprisingly, it
was the services sector, not the manufacturing sector, that caused the latest decline. This fresh setback for the French
economy perhaps comes as a surprise, given the recent allaying of some political uncertainty in the country. Prime Minister
Francois Bayrou managed to pass the 2025 budget by bypassing Parliament with Article 49.3 and survived a no-confidence
vote. However, the economy seems to view Bayrou’s achievement more as a temporary success rather than long-term
stability, as he still lacks a majority in Parliament and could be ousted by the opposition at any time.

“The services sector is a cause for concern, with a significant downturn in activity compared to the previous month. The
HCOB data presents a very weakened picture of the sector at the start of 2025. Order intakes are shrinking at a rapid pace
and future activity expectations remain well below the historical average. In this situation, new hires are hardly possible, and
we saw substantial layoffs in February.

“The manufacturing sector showed small signs of underlying improvement. The HCOB Flash PMI for manufacturing rose
slightly in January but remains in contraction territory. Demand remains weak, although new orders shrank more slowly than
in the previous month. Overall, there is little hope to be drawn from the slightly improved index figures, as the outlook for
output is still viewed pessimistically and layoffs are commonplace. The sector’s woes are exacerbated by faster increases in
input prices.”

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