France’s Business Activity Contracts Sharply in October as Political Tensions Deepen

France’s private sector entered another month of decline in October, with economic momentum faltering amid weakening demand and persistent political volatility. The latest HCOB Flash PMI survey, compiled by S&P Global, revealed a faster-than-expected contraction across both services and manufacturing — deepening concerns over the resilience of the euro area’s second-largest economy.

A Six-Month Low for Services

The services PMI fell to 47.1, a six-month low and well below the 50-point threshold that separates expansion from contraction. Analysts polled by Reuters had forecast a milder reading of 48.7, suggesting that the slowdown is broader than previously anticipated.

The services sector — which represents roughly three-quarters of France’s GDP — has now been in contraction for fourteen consecutive months, underscoring the cumulative drag of tight monetary conditions, consumer caution, and policy uncertainty following months of social unrest and political gridlock in Paris.

Manufacturing Stagnates, Composite Output Weakens

While the manufacturing PMI edged slightly higher to 48.3 (from 48.2 in September), the modest uptick was not enough to offset overall weakness. The composite PMI, blending both manufacturing and services, slipped to 46.8, its sharpest decline in eight months. Economists had expected a figure closer to 48.4.

“The subdued trend in France’s private sector persists,” said Jonas Feldhusen, junior economist at Hamburg Commercial Bank. “Output in both manufacturing and services is declining, pointing to broad-based weakness.”

This combination — mild industrial resilience but steep service-sector contraction — suggests an economy that is drifting sideways rather than stabilizing, particularly as household spending softens and export demand slows.

Employment Resilience Offers a Thin Silver Lining

Despite declining output, French firms continued to hire for a third consecutive month, though at a slower pace. Economists interpret this as a sign that companies are still expecting a medium-term recovery — or, at minimum, that they are reluctant to shed staff in a tight labour market.

However, hiring alone is unlikely to counterbalance falling orders. The forward-looking index for business expectations deteriorated again, reflecting diminished confidence in the outlook for early 2026.

Politics and Inflation Cloud the Outlook

The latest data arrive amid an unsettled political environment. Domestic policy disputes and uncertainty surrounding fiscal reform have weighed on both investor confidence and consumer sentiment. France has also been contending with higher-than-expected inflation in energy and food prices, further restraining household consumption.

External demand remains weak as well: euro-area growth has slowed, Germany’s manufacturing base continues to contract, and trade tensions between the United States, China, and Europe have begun to hit French exporters in machinery and aerospace.

The Bank of France Holds to Its Forecast — for Now

Earlier this month, the Bank of France maintained its expectation for 0.3 % GDP growth in the third quarter — matching the pace of the second — but warned that political uncertainty and deteriorating global conditions could derail that trajectory heading into winter.

If the PMI data remain below 50 through November, analysts at several European banks expect the French economy to flirt with stagnation in the final quarter of 2025, keeping the European Central Bank under pressure to justify its current restrictive stance.

A Fragile Balance

For now, France’s labour market and fiscal buffers have kept the downturn contained. Yet the persistence of weak demand, falling sentiment, and political volatility suggests that Europe’s second-largest economy faces a slow-burn contraction rather than a sudden crisis.

The October PMI data serve as another reminder that, even amid relative financial stability, the structural fatigue of Europe’s private sector has yet to lift — and that France’s recovery will depend less on policy announcements than on the restoration of confidence itself.

Source: Investing.com — “French Business Activity Contracts More Than Expected in October, PMI Shows” (October 24, 2025)