France Manufacturing and Services PMI Shows Deepening Downturn

The French flash French composite PMI slipped from 48.7 to 48.0 to signal a second consecutive monthly drop in output and the largest decline since November 2014 if the pandemic is excluded. France saw the steepest fall in its service sector activity for 22 months. There was a softening of the manufacturing downturn at the same time. With ongoing aggressive ECB rate hikes 2023 faces further downside across these metrics that still are not reflecting a fraction of the lagging impact of tightened monetary policy.

French EDF Reactors

France PMI December 2022

The flash French composite PMI slipped from 48.7 to 48.0 to signal a second consecutive monthly drop in output and the largest decline since November 2014 if the pandemic is excluded. A softening of the manufacturing downturn was offset by the steepest fall in service sector activity for 22 months.

  • French S&P Global Composite PMI Dec P: 48.0 (est 48.7; prev 48.7)
  • French S&P Global Manufacturing PMI Dec P: 48.9 (est 48.0; prev 48.3)
  • French S&P Global Services PMI Dec P: 48.1 (est 49.0; prev 49.3)

    Within the euro area, the fall in output was also broad-based by region but only France saw a deepening downturn.

    The eurozone downturn extended into its sixth successive month in December, according to flash PMI data, though the rate of decline of business activity moderated for a second month running amid a reduced rate of loss of orders, improving supply conditions, lower price pressures and an uplift in business confidence.

    Firms’ costs notably rose at the slowest rate for over one and-a-half years, reflecting the combination of weakened demand and improved supply, the latter signaled by the first quickening of supplier delivery times since the pandemic began.

    However, the overall level of business sentiment remains subdued by historical standards, reflecting the challenging environment caused by the high cost of living, rising interest rates, concerns over energy supply and the Ukraine war. Companies reported only a modest increase in payroll numbers again as a result, underscoring the cautious mood that prevails.

    • French S&P Global Composite PMI Dec P: 48.0 (est 48.7; prev 48.7)
    • French S&P Global Manufacturing PMI Dec P: 48.9 (est 48.0; prev 48.3)
    • French S&P Global Services PMI Dec P: 48.1 (est 49.0; prev 49.3)

    Comments on Europe

    Commenting on the final Manufacturing PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

    “While the further fall in business activity in December signals a strong possibility of recession, the survey also hints that any downturn will be milder than thought likely a few months ago. The data for the fourth quarter are consistent with GDP contracting at a quarterly rate of just less than 0.2%, and forward-looking indicators are currently boding well for the rate of decline to ease further in the first quarter.

    “The manufacturing downturn has moderated especially markedly in December, led by Germany and linked to a combination of improving supply conditions and reduced fears of energy constraints. The service sector malaise has also calmed, in part driven by signs of reduced fears over the cost-of-living squeeze and, in the financial service sector, reduced concerns over the tightening of financial conditions.

    “The outlook for inflation is especially encouraging, with supply chains now improving for the first time since the pandemic began and firms’ costs growing at a sharply reduced rate, feeding through to lower rates of increase for prices charged for both goods and services.

    “The downside is that this improving inflation outlook is primarily a symptom of falling demand, which has removed pricing power from many companies and their suppliers, and the business environment remains one in which confidence remains very subdued by historical standards. Thus, while the downturn is looking likely to be less steep this winter than previously anticipated by many, there remain few signs of any meaningful return to growth evident as 2022 comes to an end.”

    About the Report

    The Global Report on Manufacturing is compiled by IHS Markit based on the results of surveys covering over 13,500 purchasing executives in over 40 countries. Together these countries account for an estimated 98% of global manufacturing output2 . Questions are asked about real events and are not opinion based. Data are presented in the form of diffusion indices, where an index reading above 50.0 indicates an increase in the variable since the previous month and below 50.0 a decrease.

    Source: IHS Markit Procure

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