- Prior 45.2
- Composite PMI 44.6 vs 44.5 prelim
- Prior 44.6
Demand conditions continue to falter and put a drag on France’s services sector, as new orders slumped at its quickest pace in three years. Employment conditions also suffered amid the economic drag, with it being the weakest since May 2021. Adding to the problems is that cost pressures remain elevated with firms reporting higher operating expenses with wage pressures and hikes in suppliers’ fees. HCOB notes that:
“French service companies are in a tight spot. Activity has fallen for the sixth month in a row, demand remains weak and
input prices have once again risen at a rapid pace. This development prompted service companies to reduce their pace of
hiring in November and to be more pessimistic in their expectations for the coming twelve months. Our nowcast model
assumes a slight contraction in the services sector in the fourth quarter, with the private services sector likely to shrink
relatively sharply.
“Employees are increasingly coming under pressure. According to the HCOB PMIs, layoffs in the manufacturing sector
continued in November and the pace of hiring in the service sector has been steadily declining for several months. This
labour market weakness trend can also be seen in the recent official unemployment figures from INSEE, which have risen
for two consecutive quarters from 7.1% to recently 7.4%.
“Prices are in precarious territory. Higher wages and elevated supplier costs were cited as the main reason for November’s
sharp rise in input prices, and these pressures are translating to a rise in sales prices, which were up at a faster pace in
November. The recent figures offset hopes that French inflation will return to 2% in the near time.
“Clouds of gloominess hover around service firms. The generally downward trend in future expectations, that has been
ongoing since mid-2021, continued in November, and the corresponding PMI remains well below the long-term average. The
companies surveyed are particularly concerned about weak demand and tougher financing conditions in 2024. Our forecast
is that domestic demand will strengthen in the coming year, subsequently causing expectations and activity to increase
again.”