France’s private sector sees 1st expansion since April

France’s private sector experienced growth in August, marking its first expansion since April, with the HCOB Flash France Composite PMI Output Index rising to 52.7 from 49.1 in July.

This marked the quickest pace of growth since March 2023, driven primarily by a significant increase in services activity, which grew at the fastest pace in over two years. The uptick is partly attributed to the Olympic Games in Paris, though its sustainability remains uncertain.

Despite this improvement, manufacturing continued to struggle, with factory orders falling at the steepest rate in over four years and production decreasing at the fastest pace since January.

Overall new business across the private sector shrank for the third consecutive month, and employment in the sector declined for the first time since January.

The rise in services demand, while notable, did not fully offset the manufacturing downturn. Employment in the manufacturing sector saw a sharp reduction, marking the largest job losses since May 2020.

The outlook for the next 12 months has weakened, with confidence in future growth hitting its lowest level in nearly a year, particularly among manufacturers.

Cost pressures moderated, with input price inflation easing to a three-and-a-half-year low. However, prices charged for goods and services increased at the fastest rate since January.

Norman Liebke, economist at Hamburg Commercial Bank, noted that while the service sector’s boost may be linked to the Olympics, ongoing challenges in manufacturing and declining employment signal broader economic concerns.