France February PMI: Economic Slide Deepens, Services Sector Drags on Overall Performance
S&P Global Inc.
2025-02-21 Data released on February 21 revealed that France's Composite PMI fell to 44.5 in February, marking a 17-month low. The Manufacturing PMI rose to 45.5, a nine-month high, while the Services PMI declined to 44.5, also a 17-month low. The private sector economy in France contracted further in February, with the pace of business activity contraction accelerating to its fastest since September of the previous year.
On February 21, S&P Global released the February HCOB PMI report for France:
HCOB Flash France Manufacturing PMI at 45.5 (Jan: 45.0). 9-month high.
HCOB Flash France Composite PMI Output Index at 44.5 (Jan: 47.6). 17-month low.
HCOB Flash France Services PMI Business Activity Index at 44.5 (Jan: 48.2). 17-month low.
HCOB Flash France Manufacturing PMI Output Index at 44.6 (Jan: 44.3). 7-month high.
According to the 'flash' HCOB PMI survey, February's fall was sharp and the steepest since September 2023 as the drag from the private service sector intensified. The headline HCOB Flash France Composite PMI Output Index fell deeper into sub-50.0 territory during February, indicating a sharper rate of decline in business activity across the Eurozone's second-largest economy.
Private sector new orders decreased by one of the most marked extents in around five years. Survey respondents in both sectors frequently cited lower client demand in February, despite a fractional uptick in the HCOB New Export Business Index. French companies cut back on inventories and reduced capacity utilization due to weak demand. Backlogged orders were reduced sharply and at the swiftest pace in 15 months.
In terms of the labor market, the decline in staffing numbers was the steepest since August 2020. The non-renewal of temporary contracts and non-replacement of voluntary leavers were methods used by firms to lower headcounts, anecdotal evidence revealed.
In terms of cost, French businesses were challenged by intensified cost pressures in February. Input prices increased at the strongest rate since last August, primarily driven by the rising prices of raw materials and energy. However, a more competitive market prevented businesses from fully passing on cost increases. Prices charged for French goods and services rose only fractionally on the month.
In terms of the outlook, French companies were broadly neutral as expectations of lower manufacturing production were accompanied by a subdued level of optimism across services. Challenging sales conditions, a lack of confidence in pricing power and concerns regarding the health of the underlying economy were cited as reasons to be downbeat towards the year ahead. Despite signs of stabilization in the manufacturing sector, the persistent under-performance of the services sector is likely to act as a drag on the broader economic recovery.
Overall, the French economy slipped deeper into contraction midway through the first quarter, with the services sector showing particular weakness. In the coming months, businesses are expected to closely monitor government policies, market demand, and the global economic environment to assess the likelihood of an economic recovery.
