France Private Sector Contracts as Services Sector Weakens

The S&P Global flash composite Purchasing Managers’ Index for France fell to 48.8 in August, missing expectations of 49.5 and signaling an unexpected weakening of the private sector. The services sector served as the primary drag on growth, retreating to 48.4 as new orders decreased for the ninth consecutive month. Some firms attributed this decline in activity and demand to extreme summer temperatures.

In contrast, the manufacturing sector returned to growth territory for the first time since April, with its PMI rising to 51.5. While input price inflation for goods reached a five-month low, inflation in the services sector increased for the first time since May, driven by higher fuel costs and rising global oil prices.

Broader economic pressures persist as Labor Minister Jean-Pierre Farandou reported that the unemployment rate rose to 8.3%, the highest level in nearly six years, citing the war in Iran and heat waves as contributing factors. These conditions challenge central bank growth predictions for the third quarter, occurring while a minority government struggles to pass a cost-cutting budget through parliament and markets anticipate further interest rate hikes from the European Central Bank.