- Prior 45.4
- Composite PMI 44.8 vs 43.7 prelim
- Prior 44.6
That’s a notable positive revision as it sees French services activity outperform that of November as well now. However, it remains in contraction territory with output declining for a seventh straight month. Demand conditions remain weak and is the main drag but business optimism did at least improve to a four-month high. HCOB notes that:
“The French services sector has its hands full with problems. Business activity has gone down for the seventh consecutive
month. The employment PMI is only just holding above the expansion threshold of 50 and new business, both overall and
abroad, is declining rapidly. It is of small wonder, thus, that companies’ sentiment towards the outlook is subdued. Although
the Future Activity Index rose in December, it remained below its long-term average, indicating caution among businesses.
“The French economy finds itself stuck in a recession. Overall output declined for another month in December, extending the
series of contraction since June 2023. It looks like a recovery of economic growth will not happen all too soon with the
Composite Output PMI stabilising at a value significantly under 50. Our HCOB nowcast expects a negative GDP print in the
fourth quarter, planting the French economy in a recession.
“The employment situation in the French services sector is set to cool off in the coming months. The employment PMI for
December is just above 50 for the second month in a row, staying near the neutral threshold. According to the INSEE
services survey, companies expect less hiring in the coming months, which aligns closely with the recent PMI numbers.
“Services inflation makes it difficult for overall inflation to reach its 2% target. Both input and output prices are staying clearly
above the 50 mark, reportedly due to further wage increases and a corresponding pass-through of higher costs to the
customer. Expectedly, wage pressures are problematic for inflation, especially in services given this sector has a weight of
50 % in the French CPI basket.”