France's economy contracts at fastest pace in five months, supply pressures intensify

Investing.com – According to the flash PMI data released by S&P Global on Tuesday, France’s private sector economy weakened in March, with business activity declining at the fastest pace since October 2025.

The S&P Global France Composite PMI Output Index flash value dropped from 49.9 in February to 48.3 in March, hitting a five-month low. A reading below 50 indicates contraction.

The French Services Business Activity Index flash value fell from 49.6 in February to 48.3, while the French Manufacturing Output Index flash value decreased from 51.6 to 48.5, marking the first decline in manufacturing output for the calendar year.

Respondents attributed the weak demand to the Middle East conflict, heightened geopolitical uncertainty, and domestic clients’ hesitations ahead of local elections this month. Overall new business volume shrank at the fastest rate since July 2025.

The French Manufacturing PMI flash value increased from 50.1 in February to 50.2, reaching a two-month high.

Input cost inflation accelerated sharply, reaching the highest level since November 2023. Manufacturers reported longer delivery times due to the Middle East conflict, with supplier delays the most widespread in over three years. Companies frequently mentioned rising prices for oil and oil-based products, as well as increased costs for copper, stainless steel, and aluminum.

Demand for French goods and services in international markets declined at the fastest rate in 15 months.

Charge prices rose modestly, with the increase below that of February. Manufacturers raised their charges to the largest extent since March 2023, while service sector companies reported slight discounts.

Business confidence at the end of the first quarter weakened significantly, reversing most of the optimism gained since early 2026. Employment in France’s private sector slightly declined, with both manufacturing and services sectors experiencing small layoffs. Companies generally chose not to replace departing employees.

Joe Hayes, Chief Economist at S&P Global Market Intelligence, said that March was complicated due to local elections, with companies reporting delayed client spending. He added that April might better reflect the true state of the economy.

Data was collected from March 12 to March 20, 2026. Final March data is scheduled to be released on April 1 for manufacturing, and on April 7 for services and composite indicators.

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