- Prior 42.1
Little change to the initial estimate as France’s manufacturing sector continues to see a sharp contraction in January. New orders showed a considerable drop once again while output levels also saw a steep decline to start the year. Adding to the woes is that employment conditions are also softening and that is a worry for the economy. HCOB notes that:
“The French manufacturing sector is off to a bad start in the new year. Production has once again fallen at a rapid pace and
the employment situation deteriorated further. This is mainly due to sluggish demand, as also shown by the PMI for new
orders. Subsequently, our HCOB Nowcast points to a further contraction in the manufacturing sector in the first quarter of
2024.
“The recession in the manufacturing sector is broad-based. All three sectors – consumer, intermediate and capital goods –
have been in recession territory for some time and there are no signs of a quick and imminent improvement in any of the
sectors. Companies in the intermediate goods segment in particular are experiencing longer delivery times due to the
attacks in the Red Sea.
“The attacks in the Red Sea are leaving their mark. In January, the PMI for delivery times deteriorated by almost five points.
However, January’s level of the index is a far cry from those in 2022. If the Red Sea is avoided as a trade route in the
coming months, this could have consequences in the form of price increases. However, we would not recommend
overemphasising this possibility as there was little evidence of inflationary pressures arising from the supply-side in the
January survey.
“Manufacturers are becoming less pessimistic. The corresponding PMI is still well below the optimism threshold of 50, but
has risen for the third month in a row. Some of the companies surveyed cited an improvement in the economic environment
as a reason for hope, while others took the poor order book situation as a reason for a pessimistic view of the future.”