French private sector activity is still declining, but the decline slowed in June, with signs of improvement in employment and confidence despite sluggish demand.
Private sector activity in France contracted again in June for the sixth consecutive month, but less sharply than before. After experiencing its biggest contraction since January 2025 in May, the composite PMI index published by S&P Global rose to 47.6 in June, compared to 44.9 in May, its highest level in two months. The result exceeds the expectations of economists polled by Reuters, who expected 46.4. An index below 50 signals a decline in activity compared to the previous month.
A still fragile economic situation
Despite this slight rebound, the index “continues to signal a fragile economic situation in the second largest economy in the euro zone, the sharp intensification of inflationary tensions since the outbreak of war in the Middle East having eroded purchasing power and weighed on demand”, noted Joe Hayes, economist at S&P Global Market Intelligence. Its recovery comes after the downward revision of French GDP for the first quarter, now in contraction. The slowdown in the decline concerns both the manufacturing sector and services. Among the positive points, “employment has virtually stabilized, business confidence has strengthened for the first time since January, and cost pressures have eased,” notes S&P Global, which also notes a “slowdown in price inflation.”
This favorable trend was, however, not enough to revive demand, which remains weak with a marked drop in the volume of new business for the seventh consecutive month. Entrepreneurs attribute it to a “sluggish market, excess inventory among clients, and a reluctance on the part of the latter to commit to new projects.” Internationally, the environment remains “very unfavorable”, with a clear decline in export sales in June.
Slightly improving outlook
For the first time since January, companies see an improvement in their twelve-month business outlook and are counting on an upcoming increase in their sales, even if optimism remains limited, due in particular to the high level of fuel prices and the war in the Middle East. If the situation remains fragile, the stabilization of employment and the renewed confidence could constitute the beginnings of a recovery, provided that geopolitical and inflationary tensions ease and that demand, both internal and external, regains vigor.
