PARIS (Reuters) -France's manufacturing sector contracted in September, with output and new orders declining sharply amid rising political uncertainty, S&P Global reported on Wednesday. The Final HCOB
France's Manufacturing Sector Shrinks in September Amid Political Uncertainty
Overview of France's Manufacturing Sector Performance
PARIS (Reuters) -France's manufacturing sector contracted in September, with output and new orders declining sharply amid rising political uncertainty, S&P Global reported on Wednesday.
The Final HCOB France Manufacturing Purchasing Managers' Index (PMI) fell to 48.2 in September from 50.4 in August but was slightly up versus the 48.1 flash figure.
Aside from that August reading, the manufacturing PMI index has remained below the 50.0 threshold that separates growth from contraction since January 2023.
Key Factors Influencing Manufacturing Decline
"After tentative signs of recovery in August, September brought a sobering reality for France's manufacturing sector," said Jonas Feldhusen, junior economist at Hamburg Commercial Bank AG.
Employment Trends Amidst Manufacturing Challenges
"The decline in the headline index was primarily driven by a sharp drop in output, which in turn stemmed from deteriorating demand conditions."
New orders, particularly in the investment goods sector, weakened, reflecting broader economic sentiment. Political uncertainty following the fall of the Francois Bayrou government was cited as a factor impacting consumer and investment activity.
New Prime Minister Sebastien Lecornu, appointed on Sept. 9, aims to put a government together early this month but faces a daunting task.
Despite the manufacturing downturn, hiring activity remained positive, with the employment index staying in expansion territory for the fifth consecutive month. However, many of the new hires were temporary, indicating caution among companies.
Impact of Competitive Pressures on Profit Margins
Competitive pressures led French manufacturers to offer price discounts, squeezing profit margins as input costs edged up slightly.
The combination of subdued demand, rising costs, and pricing pressure underscores the challenging environment manufacturers face, with future output expectations slipping to their lowest since January.
(Reporting by Benoit Van Overstraeten; Editing by Hugh Lawson)
