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Prior 48.4Manufacturing PMI 49.9 vs 51.0 expectedPrior 51.2Composite PMI 49.9 vs 49.7 expectedPrior 49.1The French services sector bounced back to a two-month high, helping to shore up overall business activity in February. That as the manufacturing sector slips back into contraction, but just at the margin. Of note, new business inflows fell once again for a third straight month and at its quickest pace since July last year. That points to struggling demand conditions still plaguing the French economy in general. HCOB notes that:“The French private sector is still struggling to gain real momentum. Since last November, the HCOB Composite PMI has
been hovering around the 50.0‑point growth threshold, implying that any real progress remains absent. A prime example is
hiring activity, which stagnated in February. The main drag continues to come from the demand side as new orders declined
yet again, with the situation looking even worse for export orders.
“At the sector level, developments diverged at the start of the year as manufacturing gained some ground while services
contracted. February was no different, as factory production growth contrasted with falling services output.
“Business expectations for the year ahead weakened somewhat, yet we remain cautiously optimistic given that the index
measuring corporate confidence is still higher than the 2025 average. Politically, agreement on the 2026 budget has brought
some calm, but Macron’s succession is already casting its shadow. Despite the presidential election not being due until
2027, reports suggest Christine Lagarde’s possible early departure as head of the ECB is partly motivated by a desire to
allow Macron to choose her successor.
“Price dynamics continue to move in different directions across sectors. Service providers granted price reductions to their
customers, whereas prices for manufactured goods picked up again after having fallen in the previous month. Corporate
cost pressures increased only moderately, and inflation remains clearly below the survey’s long‑term average.”
This article was written by Justin Low at investinglive.com.
💡 DMK Insight
The recent dip in the Manufacturing PMI to 49.9 signals a potential slowdown, and here’s why that matters: With the Composite PMI also landing at 49.9, just shy of contraction territory, traders should be cautious. The services sector’s bounce back is a silver lining, but it’s the manufacturing sector that often leads economic trends. If this contraction persists, we could see ripple effects across related markets, particularly in industrial commodities and equities tied to manufacturing. Watch for key levels in the EUR/USD pair; if it breaks below recent support, it could indicate broader market pessimism. Keep an eye on upcoming economic data releases that could further influence sentiment. On the flip side, the services sector’s recovery could suggest a rotation in market focus. If traders start favoring service-oriented stocks, it might offset some of the bearish sentiment from manufacturing. But the immediate risk is clear: a sustained contraction in manufacturing could lead to increased volatility in both forex and equity markets, especially if central banks react to these indicators. Watch for any shifts in central bank rhetoric in the coming weeks as they assess this mixed data.
📮 Takeaway
Monitor the EUR/USD for a potential breakdown below support levels, as ongoing manufacturing contraction could trigger broader market volatility.
