France Final Manufacturing PMI Confirmed at 49.8 in July, Signaling Mild Contraction
Key Takeaways
- •France's final July manufacturing PMI registered 49.8, revised lower from the initial 50.0 estimate and below June's 51.2, confirming a return to sector contraction.
- •New orders fell for a third straight month and production volumes declined at a faster pace than in the prior month, signaling a weak start to the second half of the year.
- •Input price inflation reached its slowest rate in four months during July, though output prices continued to rise at a pace only slightly below June's level.
- •S&P Global noted that the majority of survey responses were collected before a sharp late-month increase in oil and energy prices, meaning the reported cost figures may understate actual pressures.
- •S&P Global warned that recent oil and gas price hikes could further undermine business confidence and raise the risk of demand destruction if inflation accelerates.
France's final manufacturing Purchasing Managers' Index (PMI) for July came in at 49.8, revised down slightly from the preliminary reading of 50.0 and below June's reading of 51.2. A PMI reading below 50.0 indicates contraction in the sector, while readings above that threshold signal expansion. The downward revision means France, the eurozone's second-largest economy, joins a broader trend of manufacturing weakness across the currency bloc, where sector surveys have generally registered below the 50.0 threshold in recent months.
The data points to a sluggish start to the second half of the year for French manufacturing, with accelerated declines recorded in new orders, production, and purchasing activity. New order inflows fell for a third consecutive month, while production volumes also decreased. The pace of the production decline gathered momentum compared to the prior month, though the overall drop remained modest.
On the cost side, July survey data signalled the slowest rate of input price inflation in four months. However, output charges continued to rise, reaching a pace only narrowly weaker than that recorded in June.
S&P Global, which compiles the PMI survey, cautioned that much of the July data was collected before a sharp rise in oil and energy prices observed toward the end of the month. This caveat suggests that cost pressures captured in the survey may understate the full impact of late-month commodity price movements.
S&P Global offered the following assessment of the results:
"France's manufacturing sector is struggling once again as inflationary pressures and weak confidence undermine order books."
"Oil and gas price increases in recent weeks will signal to businesses that the broader macroeconomic and geopolitical environments are both volatile and uncertain. This will likely erode confidence further, raising the risk of further demand destruction, especially if inflation kicks higher."
"That said, we'll have to wait and see if there is any temporary reprieve through renewed safety stockpiling and advanced purchasing if customers deem price and supply risks to warrant it."