French private sector activity contracted in October, according to the flash composite PMI from S&P Global, which fell to 48.4 from 51.1 in September. The reading is its lowest in four months and sits below the 50-point line that separates growth from contraction. Analysts had expected 50.5.
Services and manufacturing both weaken
Services PMI fell to 48.4 from 51.2 in September. Manufacturing PMI dropped to 49.3 from 50.6, its lowest level in 11 months. Demand for French goods and services fell at the sharpest rate since May, the survey showed. Firms attributed the decline to growing uncertainty and economic pressures.
Business expectations were the most pessimistic in 6.5 years. The September rebound proved short-lived.
Political pressure and bond markets
Joe Hayes, an economist at S&P Global Market Intelligence, said the September recovery was short-lived. Given the rapid deterioration of financial conditions in October and rising political pressure across the country, he said, the outcome was not surprising.
The government, with weakened parliamentary support, is trying to pass its budget and reduce a high deficit. France’s 10-year government bond yield rose above 5 percent this week, its highest in 24 years. France was the G7 country hit hardest in bond markets. Moody’s was expected to announce a rating decision on France, which it rates Aa3 with a negative outlook. S&P and Fitch rate France one notch lower than Moody’s.
Cost-of-living protests took place the previous weekend, with further mass action called for 24 October.
Source: S&P Global
