Manufacturing sector in France sees lowest fall since May 2024

The flash estimate for the French HCOB manufacturing purchasing managers’ index (PMI) inched up to 45.5 in February, according to official figures from S&P Global. This was an increase from 45 in January, while also being in line with analyst estimates. 

A PMI figure of below 50 indicates a contraction in the sector in question, whereas a number over 50 points towards growth. As such, the French manufacturing sector was still in contraction in February, mainly because of ongoing slow demand and new orders lagging compared to January. However, this was also the mildest fall in the sector since May 2024. 

Increasing input costs weighed on the sector as well, further dampening the overall outlook, with widespread layoffs continuing too. 

The flash estimate for France’s HCOB Services PMI came in at 44.5 in February, down from 48.2 in January, while also being significantly below market estimates of 48.9.

Similarly, the flash estimate for HCOB Composite PMI also fell to 44.5 in February, down from 47.6 in January, and below analyst expectations of 48. 

Dr. Tariq Kamal Chaudhry, economist at Hamburg Commercial Bank, said in the S&P France PMI report for February:  “Recession with no end in sight. The HCOB French Flash PMI in February failed to provide any relief, with the headline Composite Output Index plunging over three points to signal its deepest contraction since September 2023. 

“Surprisingly, it was the services sector, not the manufacturing sector, that caused the latest decline. The services sector is a cause for concern, with a significant downturn in activity compared to the previous month. Order intakes are shrinking at a rapid pace and future activity expectations remain well below the historical average.”

UK services sector accelerates growth

The flash estimate for the S&P Global UK services PMI advanced to 51.1 in February, which was a step up from January’s 50.8, while also being above analyst expectations of 50.8.

Although the services sector has seen some solid growth in February, overall output growth continued to lag, mainly because of weaker demand. 

New work fell at the fastest rate since November 2022, primarily due to softer business investment and reductions in client budgets. Both output charges and input costs also increased, driven by higher salaries and suppliers passing on costs. 

On the other hand, the UK manufacturing sector contracted in February, with the flash estimate for the S&P Global manufacturing PMI being 46.4, down from 48.3 in the previous month and missing market expectations of 48.4 as well. 

German manufacturing PMI hits highest reading in two years

The flash estimate for the German HCOB manufacturing PMI jumped to 46.1 in February, advancing from January’s 45, while also being above analyst estimates of 45.5, according to official figures. This was the highest reading in two years as well. 

Manufacturing production experienced its slowest fall in nine months, mainly driven by factory production contracting at the slowest rate since May 2024. However, the German manufacturing sector continued to have a negative impact on the country’s overall private sector performance. 

The flash estimate for the HCOB services PMI came in at 52.2 in February, which was a slight fall from January’s 52.5, while missing analyst expectations of 52.5 as well. 

EU Composite PMI remains stable

The flash estimate for the HCOB Eurozone composite PMI came in at 50.2 in February, which was the same as January, indicating suppressed growth in the Eurozone’s private sector. However, this was below market expectations of 50.5. 

ADVERTISEMENT

Although the services sector also slowed down, it still contributed to growth somewhat, whereas the manufacturing sector fell at the slowest rate in nine months. At the aggregate level, new orders reduced for the ninth consecutive month, mainly because of lagging demand. 

The flash estimate for the Eurozone HOCB manufacturing PMI came in at 47.3 in February, up from 46.6 in January, and missing analyst expectations of 47. Similarly, the flash estimate for the Eurozone HCOB services PMI missed market estimates of 51.5 in February, coming in at 50.7, down from January’s 51.3. 

Kyle Chapman, FX markets analyst at Ballinger Group said: “The UK and eurozone posted some ‘barely noticeable growth’ in February, according to the S&P flash PMIs. A stable 50.2 figure in the eurozone came with warnings that it was ‘definitely not the case’ that services inflation is under control, while the UK’s 50.5 print involved some familiar headlines about job losses ahead of the employers’ tax rises.

“The downside surprise in the eurozone is weighing on equities and the euro. Modest expansion is better than modest contraction, but the picture is simply not improving, even as rate cuts begin to transmit into the economy. Much of that is down to the still-high savings rate among European consumers, which comes as no surprise with the political turmoil and uncertainty on both sides of the Atlantic.

ADVERTISEMENT

“In the UK, the PMIs are once again reinforcing the warnings that the increase in payroll taxes is having a detrimental effect on hiring. The UK’s economic malaise is the result of both weak demand from poor sentiment and stagnant productivity levels on the supply side. The fact that one in three respondents’ companies had linked lower staffing levels directly to the October budget suggests that this is not going to improve in the near term.”