France business climate deteriorates further in May

France’s business climate indicator fell to 96 in May 2025, down from an upwardly revised 97 in April, marking its lowest level since February and remaining below the long-term average of 100.

France business climate deteriorates further in May

The latest decline underscores continued weakness across key sectors of the economy, particularly manufacturing and services, as firms grapple with subdued demand, uncertain policy outlooks, and fragile consumer confidence. Within the manufacturing sector, the climate indicator dropped sharply to 97 from 100 in April, underperforming market expectations of 99 and signaling a loss of momentum. This was primarily driven by a steeper deterioration in overall order books, with the balance plunging to -24 from -18 — pointing to a noticeable slowdown in both domestic and export demand. Personal production expectations turned negative for the first time in several months, falling to -1 from a robust 12 in April, while expectations around workforce size also softened slightly (-2 vs -1), suggesting that hiring plans may be put on hold amid mounting uncertainty. There were, however, slight improvements in perceptions of foreign order books (-16 vs -17) and the general production outlook (-13 vs -15), though these balances remain firmly in negative territory. Subsector analysis showed business sentiment deteriorated particularly in the food and beverages and transport equipment segments — likely due to input cost pressures and sluggish international demand — while sentiment improved modestly in machinery and equipment goods, hinting at some resilience in capital investment-related production. Beyond manufacturing, the services sector also showed signs of strain, with sentiment slipping to 95 in May from 98 in April. This decline was largely attributed to weakened expectations regarding activity levels and hiring. The employment climate indicator echoed this trend, falling to 95 from 97, driven mainly by a drop in expected staffing levels in the services industry.

Construction confidence improves

In contrast, the construction sector offered a rare bright spot, with sentiment rising to 101 from 97, moving above the long-term average, likely reflecting stable order pipelines and public infrastructure investment. Retail sentiment also improved modestly (98 vs 95), possibly due to seasonal effects or a slight recovery in consumer spending ahead of the summer months. Overall, the latest data reflect a broad-based deterioration in business confidence across France, with soft order books, cautious hiring plans, and fading production expectations weighing on near-term prospects. With PMI readings still below 50 and inflation remaining above target, the economic outlook remains clouded by policy uncertainty and external risks. Markets will be watching closely for any fiscal signals from the government and monetary cues from the ECB, particularly as growth across the eurozone continues to falter.