France’s Composite PMI Returns to Expansion at 50.4 as Services Rebound, Price Pressures Cool
France’s private sector flickered back to life in November, with the HCOB Composite PMI rising above the 50 threshold to 50.4, beating the flash estimate. A rebound in services offset a deeper slump in manufacturing, while softer output prices reinforce a benign inflation backdrop for the ECB.
PMI snapshot: growth returns, but manufacturing still drags
- Composite PMI (final): 50.4 (flash 49.9; prior 47.7)
- Services PMI (final): improved from a prior reading of 48.0
- New business: first monthly expansion since August 2024
- Prices: output price index slipped below 50, signaling increased discounting
The latest HCOB/S&P Global survey shows demand conditions stabilizing, with domestic orders improving and foreign demand steadying. Services activity drove the upturn, while manufacturing reported its steepest contraction in nine months, widening the divergence between the two sectors.
Key Points
- France’s Composite PMI climbed back into expansion at 50.4, beating the 49.9 flash and up from 47.7.
- Services strengthened on firmer demand; manufacturing weakened further.
- New business expanded for the first time since August 2024, hinting at firmer near-term activity.
- Employment softened as backlogs shrank; firms modestly trimmed headcount.
- Output prices fell below the 50 mark amid competitive pressures, implying benign inflation dynamics.
- Business expectations improved but remain cautious, with political and fiscal clarity seen as key supports.
FX and rates take: growth support, dovish inflation
For FX, the growth surprise is EUR-supportive at the margin, but the cooling in output prices tempers the move by reinforcing a subdued inflation pulse. That mix typically caps aggressive moves in EUR/USD unless broader eurozone data and global risk appetite align. In rates, softer pricing power argues for limited upward pressure on French OAT yields versus Bunds, while the curve remains anchored by expectations that the ECB can stay patient given easing price indicators.
Macro lens: what it means for the ECB
The return to expansion will be welcomed in Frankfurt, but the survey’s price signals are consistent with pre-pandemic norms and suggest minimal pass-through pressure. With employment cautious and backlogs thinning, underlying momentum remains fragile. On balance, the data do little to nudge the ECB away from a broadly dovish stance, even as growth green shoots emerge.
What to watch next
– Eurozone-wide PMIs and hard activity data to verify whether France’s services rebound is durable.
– French fiscal negotiations and political clarity, which the survey flags as potential catalysts for confidence and investment.
– Labor market prints and corporate pricing signals to gauge how quickly disinflation is feeding through profit margins and wages.
FAQ
What is the HCOB France Composite PMI and why does 50 matter?
It’s a monthly survey of private-sector activity across manufacturing and services. A reading above 50 signals expansion; below 50 indicates contraction.
How did France’s PMI surprise markets?
The final Composite PMI rose to 50.4, surpassing the 49.9 flash estimate and rebounding from 47.7 previously, driven by stronger services demand.
Does this change the ECB outlook?
Not materially. While growth improved, the drop in output prices suggests muted inflation pressures, keeping the ECB comfortably dovish for now.
What does it mean for EUR/USD?
The data are modestly supportive for the euro via growth, but the soft price component limits upside unless broader eurozone data and risk sentiment also improve.
Why is manufacturing still a concern?
The survey indicates the steepest factory output decline in nine months, reflecting weak external demand and inventory adjustments, which offset services strength.
What should traders monitor next?
Upcoming eurozone PMIs, French budget developments, OAT-Bund spread moves, and euro area inflation prints to assess durability of growth and policy expectations.
How are jobs and backlogs evolving?
Backlogs continue to shrink, and firms slightly reduced headcount, suggesting only modest employment growth near term despite the services rebound.
For traders, the balance of stronger activity and easing prices points to a growth-positive but inflation-soft narrative—an environment that typically supports risk assets selectively while keeping ECB policy expectations steady, according to BPayNews analysis.
