The latest French PMI data has sent a clear warning signal, revealing a concerning economic trend—a significant drop in employment, the largest since the pandemic. This decline reflects broader economic challenges and uncertainties within the country, particularly amidst ongoing political instability.
The HCOB France Manufacturing PMI dropped to 41.9 in December 2024, down from 43.1 in November, marking the 22nd consecutive month of contraction. This decline is driven by weak domestic and international demand, especially from key markets like the US and Germany. Consequently, firms have been cutting purchasing activity and reducing inventory levels, all while focusing on preserving cash flow. The output saw sharp contractions, particularly in sectors like construction, cosmetics, and automotive.
Employment has continued its downward trend, with the sharpest reduction in over four years. This is largely due to the non-replacement of temporary workers and a general slowdown in hiring. Political instability has been frequently cited as a major factor, with recent political turmoil, including the collapse of the French government and the subsequent no-confidence vote against Prime Minister Michel Barnier, adding uncertainty. This instability has hindered foreign investment and dampened household consumption, further exacerbating the economic slowdown.
Sources:
https://tradingeconomics.com/france/manufacturing-pmi
https://www.forexfactory.com/news/1318602-french-business-activity-declines-for-fourth-month-in
https://tradingeconomics.com/france/composite-pmi
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