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France PMI October 2021

France: Composite PMI falls further in October, but remains in expansionary territory

The IHS Markit Flash Purchasing Managers’ Index (PMI) fell to 54.7 in October from 55.3 in September, logging the lowest print in six months. However, the index remained comfortably above the 50-threshold, thus still signaling an improvement in business conditions from the previous month.

Declining manufacturing output—for the first time since the beginning of the year—stemming from persisting supply shortages, was largely behind October’s result. Against this backdrop, demand also waned as customers opted to cancel or postpone orders. Meanwhile, a different story unfolded in the services sector, with operating conditions improving at the sharpest rate in three months in October amid stronger growth in new business. Moreover, both sectors saw increased hiring activity, while firms’ output expectations strengthened.

On the price front, input cost inflation spiked to a 17-year high, largely due to higher costs for energy, as well as for wages. This prompted firms to hike their selling prices, albeit at a somewhat softer pace than in the prior month, in a bid to protect margins.

Commenting on October’s print, Joe Hayes, senior economist at IHS Markit, highlighted the impact of input shortages on the manufacturing sector:

“While until recently, the effects of inputs shortages have been most apparent on prices, we’re now seeing them have a noticeable impact on production levels and order books as firms simply lack the stocks to produce their goods, and customers are having to cancel or postpone their orders. A number of firms suggested that some parts of the economy, like the automotive sector, are really struggling.”

Meanwhile, regarding the improvement in the services sector, he warned:

“The service sector’s sensitivity to virus-related policy means risks from the pandemic cannot be ignored and we remain set for a challenging winter ahead.”

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