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Prior 50.1Composite PMI 49.1 vs 48.6 prelimPrior 50.0The headline reading is better than the initial estimate but still points to a first contraction in three months for France’s services sector. Of note, new business is seen declining at its fastest pace in six months. The good news at least is that employment conditions are seen holding up while firms’ expectations for growth in the year ahead were the most upbeat since September last year.HCOB notes that:“France’s private sector economy currently presents a diverging picture. Manufacturing has shown tentative signs of gradual
recovery in recent months, while the service sector entered the new year on a softer footing, reflected in a cooling of activity.
As a result, the composite index has slipped back below the growth threshold, due to the heavier weight of services in the
overall economy.
“At the start of the year, France’s service sector experienced a fresh setback. Order books were notably sparse, with clients
displaying caution. Against this backdrop, it is all the more noteworthy that forward‑looking business expectations have risen
significantly. This optimism appears to rest on the assumption that a resolution to the protracted budget deadlock will help
reduce uncertainty, thereby supporting both consumption and investment momentum.
“Labour market prospects in the French service sector appear to be broadly balanced. Survey data have pointed to a
modest recovery in hiring throughout the second half of 2025, though simultaneous reports of diminishing work backlogs
suggest this trend could be a fragile one. Should new business continue to fall short, the labour market outlook could
become more challenging over the coming months.
“Price dynamics in the French services sector remain modest for the time being. Where feasible, firms are attempting to
pass higher costs, which are predominantly wage‑related, on to customers in an effort to preserve margins. Overall, cost
pressures are below their historical average, indicating that no meaningful inflationary impulse appears to be building in the
service sector at present.”
This article was written by Justin Low at investinglive.com.
💡 DMK Insight
France’s services sector just reported its first contraction in three months, and here’s why that matters: The Composite PMI reading of 50.1, while slightly better than the initial estimate, signals a troubling trend with new business declining at the fastest pace in six months. For traders, this could indicate a slowdown in economic activity, which might lead to a bearish sentiment in related markets. If the services sector continues to weaken, we could see a ripple effect on the euro, particularly against the dollar, as investors reassess growth prospects. Watch for any further declines in the PMI, as a sustained drop below 50 could trigger a more significant sell-off in both the euro and equities tied to the French economy. On the flip side, if the PMI stabilizes or improves in the coming months, it could provide a buying opportunity for those looking to capitalize on a rebound. Keep an eye on the next PMI release and related economic indicators, as they could set the tone for trading strategies in the forex market, particularly for euro pairs. The immediate focus should be on the 50.0 level; a break below that could signal deeper issues ahead.
📮 Takeaway
Monitor the Composite PMI closely; a sustained drop below 50 could trigger bearish sentiment in the euro and related markets.
