France September flash services PMI 48.3 vs 52.5 expected

• Prior 55.0
• Manufacturing PMI 44.0 vs 44.3 expected
• Prior 43.9
• Composite PMI 47.4 vs 50.6 expected
• Prior 53.1

Ouch. The jump in August was largely expected to be a one-off amid the boost in demand from the Paris Olympics. But it has faded off rather quickly with little to no spillover impact to September whatsoever. The headline reading is a six-month low, reinforcing added downside pressure to France’s main sector as well towards the end of Q3. The only bright side for the ECB is that cost pressures are seen easing on the month at least.

EUR/USD falls to a low of 1.1120 currently, down 0.4% on the day from around 1.1145 earlier. The 200-hour moving average at 1.1104 will be next in line in limiting any further pressure in the session ahead. That said, this still won’t be enough to sway the ECB to move earlier in October at the balance. HCOB notes that:

“It is a sad reality; the strong growth in the French economy seen in August evaporated by September. The Flash Composite
HCOB PMI has dropped well below the critical 50 mark, now standing at 47.4. This confirms the suspicion that the service
sector surge in August was an Olympics-related anomaly, which has now dissipated. The situation in manufacturing remains
difficult, much like in the previous month. Our HCOB Nowcast predicts near stagnation in the French economy for the third
quarter, compared to the previous one. With this, France joins the group of Eurozone economies struggling with significant
growth challenges.

“There is deep disappointment in the French services sector. The HCOB Flash PMI for services dropped by nearly 7 points
in September to 48.3, following a month boosted by strong demand due to the Olympics in France. Particularly hard-hit in
September were national and international new orders, as well as backlogs of work. A bright spot remains the stable
employment levels and easing price pressures. Although input prices continued to rise, they did so at a slower pace than the
previous month. Notably, despite the sector’s weakness, service providers remain cautiously optimistic about the future,
although this optimism is significantly below the historical average.

“The year seems lost for French factories. The HCOB Flash PMI for manufacturing showed a slight improvement in
September, rising to 44.0 points, but remains deep in recession territory. Output is shrinking at the fastest pace since the
beginning of the year, and new orders continue to decline. As a result, employment shrank. The situation remains bleak, and
industrial companies lack optimism. Orders from North America and key European markets like Germany are particularly
affected. Politically, the situation remains unstable following the snap elections and the appointment of Michel Barnier as
Prime Minister, with no clear parliamentary majority in place to push through the significant economic reforms that could
revive the industry.”

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