According to the Flash PMI index published on Monday by S&P Global, the contraction in activity in the manufacturing sector caused the French economy to stagnate in October.
The French economy stagnated in October, according to the Flash PMI index published Monday by S&P Global, at its lowest level in 19 months due to a contraction in activity in the manufacturing sector. The indicator stood at 50, after 51.2 in September. The manufacturing industry index fell to 47.4 in October, returning to a low that had not been reached for 29 months. The manufacturing sector was particularly penalized by a sharp fall in new orders.
According to the 750 companies surveyed by S&P Global, “rising prices, unfavorable market conditions and high levels of customer inventory deterred customers from placing orders“. The services sector experienced a weak expansion of its activity (51.3 against 52.9 in September). But “while the services sector had supported the overall expansion of the French economy from June to September, the growth in activity was too weak in October to compensate for the sharp decline in production in the manufacturing sector», underlines S&P Global. “On a more positive note, employment growth continued in the French private sector in October, bringing the current period of expansion to twenty-two months.“, is it still indicated. A second estimate of private sector activity is to be published in early November by the cabinet. The Flash PMI had been holding slightly above 50 for several months for France, while activity in the euro zone had started to contract this summer. “Prospects darken in the euro zone’s second largest economywarns Joe Hayes, economist at S&P Global. “Although the French services sector continues to show a certain resilience in the face of the general deterioration in the economy, it will soon be impossible for it to continue to support, on its own, the growth of the entire economy.“, he concludes. Adding to signs of weakening demand, new orders fell at the sharpest pace since January 2021, notably due to a “sharp drop in business and consumer confidencein the economy. “Intense inflationary pressures, growing economic uncertainty, and rising interest rateshave mainly weighed on the morale of households and the business world, the statement explains.
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S&P Global and CIPS note, however, that costs for businesses recorded their smallest increase in a year, thanks to a decline in freight and raw material prices, which helps to “offset jumping energy bills and rising wages“. “The Flash Composite’s October decline (…) even deeper into economic contraction territory is in line with recent indicators and shows the economy is heading into recession“, Estimates the think tank Capital Economics. For Martin Beck, economists of EY Item Club, the multiplication of signs of recession should encourage the Bank of England not to tighten its key rate too abruptly at its next meeting.
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