PARIS (Reuters) – France’s service sector contracted faster than first estimated in January, with business activity declining for the fifth consecutive month amid persistent demand weakness and political uncertainty, a survey reported on Wednesday.
The HCOB France Services Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 48.2 in January from 49.3 in December, moving further below the 50.0 threshold that separates growth from contraction. January’s flash services PMI had come in at 48.9 points.
Weaker client demand and political uncertainty were cited as factors weighing on output.
“Political uncertainty dampened activity, according to some panel members, while others attributed the slowdown to weaker customer demand and reduced confidence in the economic outlook,” said Tariq Kamal Chaudhry, economist at Hamburg Commercial Bank.
France has been mired in political instability since President Emmanuel Macron called a snap election last June that delivered a hung parliament just as an unexpected hole in the public finances emerged.
Employment in the services sector in January fell at the fastest rate since October 2020, with companies citing the non-replacement of voluntary leavers and expiration of temporary contracts as reasons for job cuts.
Business confidence sank to a 56-month low, reflecting uncertainty over the domestic political climate.
Despite intensifying cost pressures, with input prices rising at the quickest pace in five months, service providers cut their prices for the first time since April 2021, driven by lower interest rates and efforts to remain competitive.
The survey also highlighted a modest decline in new business, with export orders showing signs of stabilisation.
However, firms remained cautious about the outlook, with expectations for future activity at their weakest since May 2020.
The French government faces pressure to create political stability to prevent further disruptions in the labour market, as noted by Chaudhry.
The final composite PMI figure for January – which comprises both the services and manufacturing sectors – was also several notches lower than first thought, at 47.6 points from 47.5 points in December and 48.3 points initially estimated. It is also below the 50-threshold for a fifth month in a row.
(Reporting by Reuters)
