French services sector nears stabilisation in August, PMI shows

French Services Sector Shows Signs of Stabilization in August

PARIS (Reuters) -France's services sector contracted only very slightly in August, with overall business activity nearing stabilisation, an S&P Global survey showed on Thursday.

The HCOB France Services PMI rose to 49.8 in August from 48.5 in July, marking its highest reading in a year but holding just below the 50.0 threshold separating growth in activity from contraction.

Employment in the sector grew at the fastest pace in 15 months, following eight consecutive months of workforce reductions. The uptick in hiring was attributed to both permanent and temporary recruitment.

The HCOB France Composite PMI, which covers services and manufacturing, also rose to 49.8 in August, climbing from 48.6 in July.     

"Improvements stemmed from both services and manufacturing, with rates of decline cooling in both sectors," said Hamburg Commercial Bank economist Jonas Feldhusen. 

"These are encouraging developments, though they must be viewed with caution given the broader climate of uncertainty and economic weakness in France, which now also faces the prospect of another government crisis," he added.

New service sector business continued to decline, albeit at the slowest pace since January, with foreign orders falling sharply. The volume of outstanding business rose for the first time since April 2024, reflecting staff shortages and delays on the customer side.

Input costs and output prices continued to rise modestly, with inflationary pressures intensifying to a six-month high. Despite this, competition restricted significant increases in output charges.

France's economic outlook remains fragile amid ongoing political upheavals after the prime minister called for a vote of confidence in his minority government on September 8 that he looks set to lose.

(Reporting by Makini Brice; Editing by Hugh Lawson)