- Prior 48.7
It’s a modest improvement compared to April with output seen increasing as demand conditions near back some semblance of stabilisation. So, that’s something to be optimistic about at least even if this is just but a small part of the French economy. HCOB notes that:
“Since 2023, France’s manufacturing sector has been in a state of contraction. This is evident in our HCOB Manufacturing
PMI, which has remained consistently below the no-change threshold of 50.0 since February 2023. However, a turning point
may be near. The PMI has steadily improved over the course of this year and now stands at 49.8—just shy of the expansion
mark.
“Has the turnaround in demand and production already begun? There are certainly further signs of recovery. Notably, output
increased for the second consecutive month in May. New orders are hovering at the edge of expansion, while foreign
demand has weakened slightly faster after the respective HCOB index reached a 38-month high previously. Ongoing
uncertainty stemming from the global trade conflict continues to act as a non-tariff barrier and will likely weigh on the sector
in the months ahead. At the same time, European rearmament initiatives, a more accommodative monetary policy from the
ECB, and efforts to reduce regulatory burdens at the EU level could help offset the negative impact of trade restrictions.
“These tailwinds are also reflected in business expectations, which have recovered significantly from their recent low
towards the end of 2024. Encouragingly, the labor market in France’s manufacturing sector is also benefiting. For the first
time in two years, firms are once again increasing their demand for additional staff. Unsurprisingly, better demand conditions
have led to a renewed build-up of backlogs.
“However, price developments remain subdued. Input prices are rising only moderately, primarily due to higher raw material
costs. At the same time, intense competition among firms is putting downward pressure on output prices.”
This article was written by Justin Low at www.forexlive.com.
