Private sector activity weakened further in September, according to another data set suggesting that the French economy slowed sharply over the third quarter.

The composite PMI declined to 44.1 in September from 46.0 in August, although the final outcome outpaced the flash estimate (and the consensus forecast) of 43.5 released last month. That's the sharpest contraction since November of 2020.

The service sector shrunk for a fourth consecutive month, with PMI falling to 44.4 from 46.0 in August, a marked deterioration, but a slight improvement on the 43.9 reported last month.

Service sector confidence sagged to its lowest level in three years, reflecting weak demand. New export business fell at its second-sharpest rate in series history, outside of the depths of the pandemic. Meanwhile, inflationary pressures intensified slightly.

However, employment remained robust, albeit with hiring concentrated in the service sector.

The September update suggests a marked slowdown in third quarter GDP growth, although second quarter PMIs underestimated the strength of the French economy, which expanded by 0.5 percent in second quarter. The French RPI now stands at positive three and the RPI-P at positive 20, showing overall economic activity outperforming market expectations.

Despite the French downturn, along with continued weakness in the German economy, European Central Bank officials have been careful to keep open the possibility of future rate hikes. On Tuesday, Chief Economist Philip Lane told a conference that there is"still work to be done" in bringing inflation to the bank's 2 percent target.

ECB President Christine Lagarde is due to release a pre-recorded address shortly, while Vice President Luis de Guindos and executive board member Fabio Panetta will also address an ECB conference later on Wednesday.

No revisions are expected leaving the headline composite output index at 43.5, down from August's final 46.0.

The Composite Purchasing Managers' Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of around 750 manufacturing and service sector companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains the final estimate of the services PMI. The data are provided by S&P Global.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.