France service sector decline worsens amid "client hesitancy"

France's service economy suffered a steeper decline in September, survey results on Friday showed, with the wider private sector remaining in negative territory despite being on the cusp of growth a month prior.

The Hamburg Commercial Bank services purchasing managers' index fell to 48.5 points in September from 49.8 in August, sinking further below the 50-point neutral mark. The final reading for September also landed below the flash estimate of 48.9.

"The decrease took the survey's headline measure deeper into contraction territory, although it was indicative of a modest decline in output," S&P Global said.

"September's faster reduction nevertheless compared with a near- stabilisation in August. According to panellists, activity levels were constrained by client hesitancy, raised uncertainty and generally challenging sales conditions. Amid these reports, the latest survey data signalled a further decrease in the volume of incoming new work at French services companies. September's fall extended the current sequence of shrinking new business to just over a year. However, the latest fall was the slowest since January."

New business from abroad softened again last month, though the pace of decline eased from August's "year-to-date record".

"Employment was again a bright spot for the French service economy. Workforce numbers increased in September for a second straight month amid reports of expansions to sales departments. The rate of job creation slowed, however, and was only marginal. Greater staffing capacity coincided with renewed backlog depletion in September. The decrease in outstanding business volumes was moderate overall," S&P Global said.

"French service providers looked towards the coming 12 months with optimism. In fact, the overall level of positive sentiment rose to a three-month high. Where growth was projected, panel members cited expectations of stronger demand conditions following the release of new offerings to the market. That said, compared against the historical average of the series, the level of confidence was subdued."

Data on Wednesday had shown France's manufacturing economy fell into decline last month.

The Hamburg Commercial Bank's manufacturing PMI fell to 48.2 points in September from 50.4 in August. Though the reading was a hair above the flash estimate of 48.1, it still was below the 50-point threshold that separates growth from decline.

The wider composite PMI, released on Friday and encompassing both the manufacturing and services surveys, fell to a five-month low of 48.1 points in September from August's tally of 49.8. The final composite reading was shy of the flash estimate of 48.4.

"Both broad sectors posted faster declines in output, although the fall in manufacturing was steeper. This was also true for new orders, with goods producers seeing a quicker decline than service providers. However, composite new business decreased at a softer pace than in the month prior," S&P Global said.

The service PMI features a panel of around 400 service providers in France. Responses were collected in the second half of the month.