French private sector activity declines

The French private sector experienced a decline in activity in October 2026, following a brief recovery in September. This is according to a preliminary survey by S&P Global, which noted a simultaneous drop in both services and industry sectors, along with a deterioration in business confidence.

PMI index shows contraction

The composite PMI index from S&P Global dropped to 48.4 points in October, down from 51.1 in September. The index uses a threshold of 50 points to distinguish between growth and contraction. While this result does not confirm a decrease in France’s overall GDP for the quarter, it highlights a sharper decline in the business climate than economists had predicted.

Services and manufacturing sectors contract

The services sector, which had driven the improvement in September, saw the most significant drop, with its activity indicator falling from 51.2 to 48.4 points. In manufacturing, the PMI index declined from 50.6 to 49.3 points. All three main indicators—composite, services, and industry—now indicate contraction. New orders for goods and services have fallen at their fastest rate since May, driven by weak foreign demand and cautious domestic spending.

Worsening outlook and employment trends

The outlook for French business activity has reached its lowest level since April 2020, and excluding the pandemic, it is at levels not seen since 2012. Factors cited include a difficult social climate, political instability, and rising financing costs. Employment in the private sector has declined for the sixth consecutive month, reflecting companies’ adjustments to weaker economic conditions, though this does not represent a national unemployment forecast.

Contrast with the eurozone

The European composite PMI index remained above 50 points in October at 51.9, though it declined from 53.1 in September. This indicates continued growth within the eurozone, albeit at a slower pace. S&P Global notes that France’s downturn is one factor behind this slowdown, but it is not the sole cause. This divergence complicates monetary policy decisions, as high production costs in some countries persist, while demand weakens.

PMI index and its significance

The PMI index is based on business responses and provides an early snapshot of activity trends, though it is not a substitute for official economic statistics. The October 23 results are provisional and may be adjusted in future surveys. As the year ends, the combination of hesitant economic activity and high financing costs is creating a more challenging environment for both households and businesses.