French Economic Activity Declines Sharply in September - PMI Insights

Overview of French Economic Activity

PARIS (Reuters) -French economic activity contracted in September at the sharpest rate since April, as both manufacturing and services sectors in the euro zone's second-largest economy experienced declines, S&P Global reported on Tuesday.

Manufacturing Sector Performance

The HCOB Flash France Composite PMI Output Index fell to 48.4 in September from 49.8 in August, marking a five-month low. A reading below 50 indicates a contraction in activity.

Impact of Customer Demand

The manufacturing sector was particularly hard-hit, with its headline PMI dropping to 48.1 from 50.4 in August, its lowest level in three months. The manufacturing output index also plunged to 45.9 from 49.8, reaching a seven-month low. Meanwhile, the services PMI slipped to 48.9 from 49.8, a two-month low.

Employment Trends

The downturn was driven by subdued customer demand, with total new orders falling for the sixteenth consecutive month.

Pricing and Competition

"After signs of stabilization in the French private sector over the summer months, the September data has brought a sobering reality check," said Jonas Feldhusen, an economist at Hamburg Commercial Bank. "Economic activity in France has weakened more sharply than at any point since April."

Despite the slowdown, employment in the private sector rose for the second consecutive month, albeit marginally. However, business confidence remained subdued, with political uncertainty cited as a factor weighing on expectations.

In terms of pricing, French companies reduced their charges for the first time since May, despite a softer rise in operating costs - reflecting strong competition and weak demand.

(Reporting by Makini Brice; Editing by Hugh Lawson)