France manufacturing PMI beats forecasts

The HCOB France Manufacturing PMI rose to 49.9 in August 2025 from 48.2 in July, surpassing market expectations of 48, according to preliminary estimates. This marked the highest level since January 2023, signaling a notable improvement in momentum even though the sector remains fractionally in contraction territory.

The uptick suggests that French manufacturers are gradually stabilizing after a prolonged period of weakness, yet headwinds persist from weakening international competitiveness and a difficult external environment shaped by tariff disputes and slower global demand.

While overall business activity was broadly stable in August, order volumes continued to decline, highlighting underlying demand fragility. Export-oriented firms reported particularly weak conditions as US tariffs weighed on sales and as sluggish demand from key European partners limited growth opportunities. Survey respondents also pointed to lingering disruptions in global supply chains, with new tariff regimes and regulatory frictions extending delivery times despite lower overall demand.

On the employment front, manufacturers reported stronger hiring activity, with firms adding both permanent and temporary staff. This may reflect an effort to maintain operational flexibility amid uncertainty, while also preparing for potential demand recoveries in certain subsectors such as machinery and high-value-added components. At the same time, price dynamics showed renewed pressures, with input cost inflation accelerating due to higher wage bills and increases in raw material prices. Some manufacturers also cited rising energy costs as an additional burden, though to a lesser degree than in 2022–23.

Looking ahead, sentiment remained subdued, with companies generally pessimistic about the outlook for future output. Weaker expectations were concentrated in traditional manufacturing industries, including metals and textiles, while more resilient sectors such as aerospace and pharmaceuticals provided partial offsets. The divergence reflects structural challenges: French industry continues to struggle with cost competitiveness compared to Germany and Italy, while global protectionist trends have limited export opportunities.

Taken together, the August PMI reading underscores the fragility of France’s manufacturing recovery. Although the index is at a 19-month high, it has yet to cross the 50-threshold into expansion, and business confidence remains muted. The findings will be closely monitored by policymakers in Paris and at the European Central Bank, especially as domestic demand holds steady but external headwinds continue to limit growth.