France: Manufacturing PMI increases in May
The HCOB France Manufacturing Purchasing Managers’ Index (PMI) rose to 46.4 in May from 45.3 in April. As a result, the index remained below the 50.0 no-change threshold, but signaled a softer deterioration in manufacturing-sector operating conditions compared to the previous month.
The sustained contraction in French manufacturing was primarily driven by a continued decrease in production volumes, attributed to weak demand and lower order books. Reductions in purchasing activity and inventory levels further reflected the challenges faced by manufacturers. Moreover, new export orders shrank at a steeper rate.
Prices charged for French manufactured goods increased for the first time in a year, driven by manufacturers passing on higher costs to their clients. This price adjustment came after reports of rising raw material costs, notably for chemicals and steel, which led to a modest increase in overall input prices for the second consecutive month. Finally, business sentiment within the French manufacturing sector reached its highest level since February 2022. This optimism was supported by improved conditions in key external markets, suggesting a potential for future recovery despite the current problems the sector is facing.
Digging into the subsectors, Norman Liebke, economist at Hamburg Commercial Bank, said:
“Right now the consumer goods sector is the only growing sub-sector in France. The other two segments – intermediate and investment goods – both shrank rapidly, although at slightly slower rates compared to April. Better consumer goods demand also led to higher manufacturing output price inflation, which drove broader manufacturing inflation in May.”