Decline in the French Economy Accelerates with Drop in New Orders

Forex - Business activity in France contracted sharply in November, marking the most significant decline since the beginning of the year; new orders and future expectations fell to a four-year low. According to the results of a survey conducted in collaboration with S&P Global and Markit, the HCOB France Services PMI plummeted sharply to 45.7 in November from 49.2 in October, reaching its lowest level in ten months. Market expectations had anticipated the index to decline to 49.0.

The broader composite PMI index, which includes both the services and manufacturing sectors, fell to 44.8, the lowest level since January, down from 48.1. Readings below the 50 level indicate a contraction in activity. Notably, the decline in new orders from international markets contributed to the overall weakness, as businesses reported the largest drop in new order volumes in four years.

For the first time since May 2020, French businesses expressed negative expectations for their activities in the coming year. In the manufacturing sector, the PMI index decreased to 43.2, falling even below the market expectation of 44.0 from a previous level of 44.5. Analysts suggest that political uncertainty may be partially influencing these declines, as France’s far-right National Rally party threatens to topple Prime Minister Michel Barnier's fragile coalition government over a dispute regarding the 2025 budget. Despite this gloomy outlook, there was a slight increase in job creation within the private sector.