France: Composite PMI declines further below 50-threshold in December
The S&P Global Flash Purchasing Managers Index (PMI) fell to 48.0 in December from 48.7 in November, marking the lowest reading in 22 months. As such, the index was below the 50-threshold, signaling worsening business conditions from the previous month.
Decembers fall was driven by contractions in both services and manufacturing: Business activity was dampened by lower domestic and foreign demand conditions—new orders declined for the fifth consecutive month—and higher interest rates. That said, the decline in the manufacturing sector was the weakest in the last seven months. Turning to prices, while input price inflation remained stable since November, output prices increased to their fastest level in the last five months as companies tried to protect their margins. More positively, business confidence edged upwards in December as companies expanded employment for the twenty-fourth month running. However, confidence levels remained the second-weakest seen over the past two years.
Commenting on the outlook, Joe Hayes, senior economist at S&P Global, said:
“Downside risks remain abundant, with the outlook for energy prices still a big uncertainty for households and firms. Were also seeing the impact that higher interest rates are having on the economy, with some firms attributing this as a factor behind lower business activity. Based off the latest survey results, were likely to see French GDP contract in the fourth quarter, which will raise the risk of a technical recession being confirmed in 2023.”