PARIS (Reuters) – France’s services sector shrank further in January as businesses faced weak demand and political uncertainty, according to a closely watched S&P Global business survey released on Friday.
The HCOB Flash Services PMI index of business activity fell to 48.9 from 49.3 in December, below analysts’ expectations for a reading of 49.3 and below the 50.0 threshold indicating growth.
The broader French private sector saw a slight improvement, with the Composite PMI Output Index rising to 48.3 from 47.5, beating forecasts of 47.7, while the Manufacturing Activity Index rose to 45.3 from 41.9, beating forecasts of 42.3.
“The French economy has disappointed at the beginning of 2025… It is primarily the political crisis that is paralyzing the country economically,” said Tariq Kamal Chaudhry, an economist at the Hamburg Commercial Bank.
“The next budget vote will decide not only the fate of (Prime Minister) Bayrou’s government, but also the country’s economic stability,” he added.
Business confidence fell in January, with companies assessing the outlook for the next 12 months as largely neutral, compared to mild optimism in the previous month.
Surveyed companies also recorded the fastest pace of job cuts since October 2020.
France’s official statistics agency INSEE reported on Thursday a decline in French business confidence in January.
France will see weak but steady economic growth in the first half of 2025 as political drama over the 2025 budget weighs on consumers and businesses, INSEE said last month.
