The latest PMI survey for the French economy reveals a deepening crisis in France's manufacturing sector in August. Production and purchasing activities experienced substantial declines as a result of a significant decrease in new orders, which was previously observed only during the Covid pandemic or the global financial crisis.

Manufacturers expressed pessimism regarding future output for the first time this year, and job cuts persisted for the 15th consecutive month. Companies were hesitant to increase prices substantially amid concern about losing competitiveness, even though input costs have risen to their greatest level in 18 months.

The PMI experienced declined to 43.9 from July's 44.0, indicating the most severe decline in factory conditions in seven months. There was a substantial decrease in demand, both domestically and internationally, as evidenced by the steep decrease in new orders from Europe and the Americas. The intermediate and investment products sectors experienced the most significant decrease in output.

As a result, manufacturers reduced their employment and purchasing activities, and inventory levels decreased. Supplier delivery durations increased, despite the decreased demand, emphasising the ongoing challenges in the supply chain. In general, the French manufacturing sector is confronted with a gloomy future as it navigates numerous obstacles.

No revision is expected to the flash estimate.

The Manufacturing Purchasing Managers' Index (PMI) provides an estimate of manufacturing business activity for the preceding month by using information obtained from a representative sector survey incorporating around 400 companies. Results 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 data are released 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 ISM manufacturing index in the U.S. and the S&P Global PMIs elsewhere, 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..

The S&P Global PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.