In July, France's private sector output nearly stabilised, buoyed by a three-month high in both the composite PMI output index of 49.5 and services PMI of 50.7, signalling renewed service sector activity. However, the manufacturing PMI dropped to a six-month low of 44.1, indicating sharper contraction in factory production. This dichotomy resulted in a slight overall output decline.

The latest figures highlighted persistent demand weakness for French goods as well as services, despite continued employment growth. Business confidence declined for the fourth consecutive month, reaching its lowest level this year, amid rising input costs and output prices.

Manufacturing faced its 26th consecutive monthly output fall, with the fastest contraction since January, attributed to weak sales and customer delays. Conversely, service sector activity rebounded, driven by the Olympic Games and post-election optimism.

Despite optimism for higher activity in the next 12 months, confidence waned due to concerns over the housing market and potential disruptions from the Olympics. This complex economic landscape underscores the challenges and cautious optimism in France's private sector.

The French PNI data is expected to show the manufacturing index will rise to 46.0 in July from 45.4 in June while the services index will edge up to 49.8 from 49.6. The composite index is forecast at 49.1, up slightly from 48.8.

The flash Composite Purchasing Managers' Index (PMI) provides an early estimate of current private sector business activity by combining information obtained from surveys of around 1,000 manufacturing and service sector companies. The flash data are released around ten days ahead of the final report and are typically based upon around 85 percent of the full survey sample. Results covering a range of variables including manufacturing output, employment, new orders, backlogs and prices are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The report also contains flash estimates of the manufacturing and services PMIs. The data are produced 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.