FRANCE DATA: Feb Flash PMIs: Services Much Weaker Than Expected

The much weaker-than-expected French flash February services PMI reading has driven the market reaction. At 44.5 (vs 48.9 cons, 48.2 prior), it's the lowest since September 2023 and the largest one-month drop since September last year. Manufacturing was slightly better-than-expected at 45.5 (vs 45.3 cons, 45.0 prior), with the composite index at 44.5 (vs 48.0 cons, 47.6 prior).

There was no indication that a slightly more stable political situation had helped sentiment, with consumer confidence still weak and business investment intentions cautious. Input cost inflation accelerated, but passthrough to output charges was limited.

Key notes from the release:

• "Activity at French services companies fell at a pace that was considerably faster than in January"...."This contrasted with the trend in the goods-producing industry, which posted its softest decrease in output since last July".
• “Survey respondents in both sectors frequently cited lower client demand in February. Low footfall, weak confidence in the outlook and investment reticence also dampened sales”
• “Notably, a fractional uptick in the HCOB New Export Business Index implied that February’s slump in new orders was primarily domestic-driven”
• French private sector companies lowered their employment levels midway through the first quarter”.
• “Input prices increased at the strongest rate since last August, with both manufacturers and services firms reporting marked rises in their operating expenses”… “a more competitive market prevented businesses from fully passing on cost increases”