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France’s services sector contracts sharply in September – flash PMI

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– France’s dominant services sector contracted at an even sharper pace in September, a monthly survey showed on Friday, as falls in demand and new orders weighed on the euro zone’s second-biggest economy.

The HCOB France flash purchasing managers index (PMI) for the services sector, compiled by S&P Global, fell to a 34-month low of 43.9 points in September from a final 46.0 in August and well below a forecast of an unchanged level.

That is the lowest since the 38.0 points recorded in November 2020, when France was in the midst of its second COVID-19 induced lockdown. September is the fourth month in a row with a figure that is below the 50 level separating expansion and contraction in activity.

The flash September manufacturing PMI number came in at 43.6 points – also much lower than the 46.0 points in August and way off a poll forecast of an unchanged level.

The August composite flash PMI number comprising both the services and manufacturing sectors stood at 43.5 points, down from the final 46.0 August composite number and well below a poll forecast of 46.0.

“The French economy is steering towards some choppy waters. Business activity has fallen sharply in both the service and manufacturing sectors in September, mainly due to a slump in demand for French products and services. As a result, French companies are drawing down their order backlogs,” said Norman Liebke, Economist at Hamburg Commercial Bank.

“In September, manufacturers are more pessimistic than at any time since the pandemic began as growth expectations fell to their lowest since May 2020. In line with this, the French National Bank has recently revised down its forecast for economic growth in 2024.”

France’s economy will grow slightly less than expected in the next two years due to weakness in its main trade partners, the central bank said on Monday, but it raised its 2023 forecast after a surprisingly strong second quarter.

“Economic growth for this quarter steers in the direction of stagnation, with our (…) model pointing to growth of just 0.2%. It is important to note however that this will be almost entirely driven by the public service sector,” Liebke added.

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