- Prior 45.2
- Manufacturing PMI 42.6 vs 43.1 expected
- Prior 42.8
- Composite PMI 44.5 vs 45.0 expected
- Prior 44.6
The French economy continues to stutter in November, with overall business activity contracting at a rather similar pace to the month before. The manufacturing index slumped further with output in the sector falling to its weakest in 42 months. Overall, softer demand conditions continue to take a toll on the French economy. HCOB notes that:
“The French economy is kind of in a dead-end. Output has declined for the sixth month in a row, especially precipitated by lower demand overall and from abroad. Both sectors’ activity levels – manufacturing and services – declined significantly in November. It looks as if geopolitical and economic uncertainty played a major role here, as this was mentioned by some companies as reason for the lack of new orders. Our nowcast model, which incorporates the latest PMI data, is pointing to a marginal decline in GDP growth.
“Services companies are struggling to get out of the mud. Lower activity levels, tighter financing conditions and lower demand are dragging on companies’ optimism. Although the corresponding PMI remained above 50, it is well below its longterm average. However, services companies were able to pass through higher input prices to their clients.
“Unemployment will likely rise in the coming months. Employment has dropped for the first time since late 2020 after a clear downward trend in recent months. Manufacturers are laying off workers while services companies are hiring at a slower pace. The downward trend in the PMI surveys was confirmed by official employment data by INSEE, which shows that the unemployment rate has risen for the past two quarters.
“The inflation threat remains at large. The latest PMI data indicate that prices are still rising sharply, suggesting that official inflation statistics could remain at higher-than-anticipated levels for longer than previously thought. Input prices rose again at basically the same sharp pace as last month, while output prices notch up again. The upwards move of the output prices index was driven by services companies. Overall, input price pressures remain strong, and considering the pass-through dynamics of input price inflation to customers, it implies that the upward trajectory of output prices may not have concluded.”
