French economy stabilises in November as services expand, PMI shows

PARIS (Reuters) -French business activity almost stabilised in November, according to a survey published Friday, as unexpected growth in the country's dominant service sector nearly offset a sharper than anticipated decline in manufacturing output.

The HCOB France flash purchasing managers index (PMI) for the services sector came in at 50.8 points this month. It is the first time in 15 months that the index has been above the 50 points threshold separating growth from contraction.

A Reuters poll forecast for the November flash services PMI stood at 48.4 and the final October figure was at 48.0.

But the flash manufacturing PMI for this month fell to 47.8 points - a nine-month low - from 48.8 in October, and also came in below a Reuters poll forecast for a figure of 49.0 points.

The flash November composite PMI - which comprises both the services and manufacturing sectors - rose to a 15-month high of 49.9 points, from 47.7 in October, and much higher than a forecast for a figure of 48.1 points.

"The French private sector shows signs of stabilisation in November after October's moderate decline ... The service sector is strengthening, but the manufacturing sector remains under pressure, " said Hamburg Commercial Bank economist Jonas Feldhusen.

New orders showed a mixed picture, with a slight improvement in services demand countered by continued weakening in manufacturing. However, new export business increased for the first time since February 2022, driven by growth in manufacturing export sales.

Employment fell across both sectors, marking the first drop since July, while business confidence improved slightly, though it remained below historical averages.

Cost pressures intensified, with input price inflation accelerating due to higher metals prices and wage expenses. Despite this, output charges remained unchanged, indicating a lack of pricing power.

"The foundation of this stabilisation remains on shaky ground," Feldhusen added, citing unresolved budget issues and political tensions.

France's central bank earlier said this month the economy "will grow slightly in the fourth quarter" as high political uncertainty contributes to a slowing pace of expansion in November, although it did not give a figure.

(Reporting by Benoit Van Overstraeten; Editing by Toby Chopra)