September Sees Smaller Contraction Than Initially Estimated in the French Services Sector

04 Oct, 2023

September Sees Smaller Contraction Than Initially Estimated in the French Services Sector

France's services sector contracted at a slower pace than initially estimated in September, though it still experienced its swiftest decline in almost three years. This decline was driven by a decrease in new orders and export business, putting pressure on the eurozone's second-largest economy, as revealed by a survey on Wednesday.

The final Purchasing Managers Index (PMI) for the services sector in France, conducted by S&P Global and known as the HCOB France PMI, dropped to 44.4 points in September. This was the lowest level since November 2020, down from 46.0 points in August. Although it exceeded the initial "flash" reading of 43.9 points for September, it remained well below the 50-point threshold indicating growth in activity. Notably, the index has been below this threshold for four consecutive months.

Similarly, the final composite PMI figure for August, which combines data from both the services and manufacturing sectors, was not as dire as initially reported. It stood at 44.1 points, a decline from August's 46.0, but an improvement from the initially estimated 43.5.

This final reading represented the lowest level since November 2020 when France was grappling with its second COVID-induced lockdown. Norman Liebke, an economist at Hamburg Commercial Bank, commented on the situation, saying, "The French services sector is facing significant challenges, with business activity declining for the fourth consecutive month. Currently, there are no signs of a reversal in this trend." He added, "Consistent with these activity trends, both domestic and international new business is weakening. This could potentially lead to a turbulent job market in the near future. Although hiring is currently robust, a sustained decline in activity may eventually cool down this hiring spree."