French private sector decline slows as manufacturing improves

France’s private sector continued to contract in March, though the pace of decline moderated, supported by early signs of stabilization in the manufacturing sector, according to a preliminary survey from S&P Global published on Monday.

French private sector decline slows as manufacturing improves

The Hamburg Commercial Bank flash France composite Purchasing Managers' Index (PMI) rose to 47.0 in March from 45.1 in February. Although still below the 50-point threshold that separates growth from contraction, this marked a two-month high and indicated a milder downturn in overall business activity. The composite data reflects both manufacturing and services sectors. The flash manufacturing PMI increased to 48.9 in March from 45.8 the previous month, reaching a 26-month high. The sector’s output sub-index climbed to 48.8 points, its highest level since May 2021. However, the service sector remained the primary drag on the economy. The services PMI rose to 46.6 from 45.3, also a two-month high, but the decline in output was still significant, marking the second-sharpest drop since January 2024.

French companies continued to report declining demand

S&P Global noted that French companies continued to report declining demand for both goods and services, along with “subdued” business sentiment and further job losses. Business confidence fell to its lowest level since April 2020, with firms citing concerns over economic uncertainty, global tensions, and weak conditions in key industries like automotive, construction, and agriculture. Private sector employment dropped for the fourth consecutive month, though the trend varied across sectors. Services companies reduced their workforce, while manufacturing firms recorded their first employment increase since May 2023. Tariq Kamal Chaudhry, economist at Hamburg Commercial Bank, commented: “France’s economy is struggling to gain momentum. The political landscape, which has significantly dampened market sentiment in recent months, is now somewhat less unstable.” Chaudhry also highlighted that France passed a delayed 2025 budget law in February, helping it avoid a downgrade of its credit rating, but uncertainty remains regarding future economic policies.

Final data to be published next week

The final March PMI data for France’s manufacturing sector is set to be released on Tuesday next week, with services and composite readings due on Thursday. The indices are derived from responses to surveys sent to 750 companies in the French manufacturing and services sectors, with the flash reading based on 85% of survey responses.