French Economic Activity Shrinks as Private Sector Loses Momentum

The French economy recorded a sharp decline in October as activity metrics returned to contraction territory. The Services PMI fell to 46.2 points while the Composite PMI reached 46.6. This result reflects the most intense pace of contraction observed in the country's private sector since May.

The deterioration stems primarily from reduced domestic demand and a drop in new business. Local companies are facing a landscape of political and geopolitical uncertainty that has impacted business confidence. Pessimism regarding the next twelve months reached its lowest level since April 2020.

The labor market in France has also suffered negative impacts with job cuts for the sixth consecutive month. Inflationary pressures from fuel and wage costs remain high. However there was a moderation in the pace of price increases charged to customers compared to the previous month.

In Germany the scenario shows a different pace with the services sector maintaining growth. The German Services PMI fell to 52.5 points but remained above the expansion threshold. Activity was supported by the execution of backlogged orders despite customer caution.

The weakening activity in the eurozone increases global risk aversion and may strengthen the dollar against the euro. The European economic slowdown tends to pressure Bitcoin by reducing the liquidity available for higher-risk assets in the international market.