French business activity unexpectedly contracted in October, a preliminary survey by S&P Global showed. The composite PMI, which covers manufacturing and services, fell to 48.4 from 51.1 in September.
A reading below 50 indicates contraction. The reading was well below expectations in a Reuters poll for a reading of 50.5.
The data showed that the September recovery was short-lived. Demand for French goods and services shrank at the fastest pace since May, while companies reported greater uncertainty about business development.
Services back in contraction zone
The index for the services sector fell to 48.4 points from 51.2 points a month earlier. Expectations were for 50.7 points.
The industrial PMI also fell below the 50-point mark, reaching 49.3 points compared to 50.6 points in September. Analysts had forecast 50.5 points.
“The recovery in economic activity in September proved short-lived, which is hardly surprising given the rapid tightening of financial conditions and the further intensification of political pressure in France in October,“ said Joe Hayes, senior chief economist at S&P Global Market Intelligence.
Political tensions weigh on expectations
According to Hayes, the indicator of business expectations for the next 12 months has reached its lowest level in six and a half years. Businesses have cited uncertainty surrounding presidential elections in the spring of 2027, which is compounded by concerns about the state of public finances.
French government debt spending has risen in recent weeks as investors have begun to price in higher the risks associated with a large budget deficit and political instability. Protests and unrest have further heightened tensions over the government's ability to implement measures to contain the deficit.
“The October results could be a harbinger of what is to come in the months ahead,“ Hayes said. He said companies were facing an uncertain political environment and already-existing problems with public finances.
The PMI indices are based on a survey of companies and provide an early assessment of economic activity. They are not official GDP statistics, but are used as a signal of the direction of the economy before the final data is released.
Sources: reuters.com, northlandnewsradio.com, apnews.com