France private sector activity shrinks for ninth straight month

The HCOB Flash Composite PMI for France edged up slightly to 48.0 in May 2025 from 47.8 in April, matching market expectations.

France private sector activity shrinks for ninth straight month

While the modest uptick offers a glimmer of stabilization, the index remains firmly in contraction territory for the ninth consecutive month, highlighting the persistent challenges facing the French private sector. Any reading below 50 indicates a decline in overall business activity. The services sector continued to be the primary drag on overall performance, with its PMI ticking up marginally to 47.4 from 47.3, still signaling a sustained downturn in activity. Meanwhile, manufacturing showed signs of nearing stabilization, with the index rising to 49.5 from 48.7 — its highest reading since June 2024. Though still technically in contraction, the slower rate of decline in factory output and new orders suggests that the industrial sector may be approaching a turning point, particularly if global demand picks up in the months ahead. However, the overall business environment remains fragile. A continued fall in new order volumes weighed on output across both monitored sectors, with service providers again reporting the steeper drop in sales. Weakened domestic demand, tighter corporate budgets, and uncertainty around fiscal and regulatory policies were cited as key factors discouraging new business.

Intensifying competition

Intensifying competition for a shrinking pool of work also led firms to slash their output charges, resulting in the steepest monthly decline in selling prices since January 2021. This deflationary trend, while potentially welcome from an inflation-control perspective, points to eroding pricing power and narrowing margins across the private sector — especially in services such as finance, consulting, and tourism. Labor market conditions also continued to deteriorate, with May data indicating sustained job shedding. Many firms, particularly in services, continued to reduce headcount in response to weaker demand and ongoing efforts to cut costs. This trend was further reinforced by a sharp fall in backlogged work, indicating that current levels of activity are insufficient to maintain existing staffing levels.

Business sentiment also took a significant hit

Confidence among French firms falling to its lowest level since April 2020, at the height of the first COVID-19 lockdowns. Mounting concerns over economic stagnation, sluggish consumer spending, and rising political uncertainty ahead of European parliamentary elections in June weighed heavily on outlooks for future activity. Looking ahead, the path to recovery remains uncertain. While resilient manufacturing may offer a slight buffer, the continued contraction in services, falling employment, and worsening business confidence suggest that France’s private sector will remain under pressure in the near term — unless clearer signs of policy support or demand recovery emerge across the broader eurozone.