France January flash services PMI 48.9 vs 49.3 expected

• Prior 49.3
• Manufacturing PMI 45.3 vs 42.3 expected
• Prior 41.9
• Composite PMI 48.3 vs 47.7 expected
• Prior 47.5

Business activity in France contracted for a fifth month running now, with the services sector marginally slipping while manufacturing conditions also slumped but at least showing a slight improvement in terms of output. The rates of decline in economic activity and new sales softened to start the new year but there’s not much optimism in the outlook though. Business confidence fell again to be broadly neutral as firms also reported the fastest pace of job cutting
since October 2020. Tough times. HCOB notes that:

“France’s economy disappoints at the start of 2025. The Flash Composite HCOB PMI for January suggested that the French
economy contracted again. The latest decline in private sector economic activity was slightly weaker than in the previous
month, thanks to the manufacturing sector, which recorded the smallest production drop since mid-2024. The French
economy is not fundamentally in a dire state, as indicated by the sub-index for future output, which is neutral. It is primarily
the political crisis that is economically paralysing the country. Current Prime Minister François Bayrou is attempting to
negotiate with the overpowering opposition to avoid a looming collapse and pass a budget for 2025. The next budget vote
will decide not only the fate of the Bayrou government but also the economic stability of the country.

“The HCOB Flash PMI for manufacturing in January offered a small spark of hope. Despite an improvement in the index
compared to the previous month, the situation remains deeply contractionary and the medium-term outlook remains
recessionary overall. Industrial companies are particularly burdened by declining order intakes both domestically and
internationally. Input prices remain inflationary, although January’s rise was well below the long-term average. In contrast,
output prices are shrinking, indicating a challenging demand situation. Unexpectedly, future output expectations made a
significant leap, signalling forecasts of only slight contraction in 2025. This offers some hope that the long-term outlook might
brighten somewhat by the end of the quarter. However, the employment situation remains poor as industrial companies
continued to let staff go.

“The HCOB Flash PMI for the service sector has been unable to signal growth since the summer months of 2024. Political
uncertainty, business closures, customer budget cuts, and expectations of weaker revenues were among the concerns
expressed by participants. The good news is the potential for improvement. Notably, the index for new orders made a leap
towards stabilisation. Future activity expectations in services are just about holding above the neutral level. However, service
providers are still grappling with rising input prices, driven by wages, although cost pressures remain below the long-term
average.”

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