The French manufacturing PMI report for December 2024 paints a grim picture of the country's manufacturing sector, which contracted at its sharpest rate since May 2020. The PMI index dropped to 41.9, in line with the consensus and far below the 50.0 threshold, signalling a worsening decline in operating conditions. French manufacturers grappled with weakened domestic and export demand, particularly in the car and construction sectors. New orders and export sales remained sluggish, reflecting persistent market fragility.

Production volumes plunged as firms scaled back output in response to subdued client appetite. Inventories saw a record contraction, with pre-production stocks declining at a pace unseen since June 2009. Employment also fell sharply, with December marking the most significant job losses in five months.

To offset falling sales, manufacturers aggressively discounted goods, marking the third consecutive month of price reductions. However, this strategy offered little relief as business sentiment remained bleak, overshadowed by political uncertainties and weak client investment outlooks. The latest data takes the French RPI to 0 and the RPI-P to 0. This means that economic activity in general is within the consensus of the French economy.

No revision from the dismal 41.9 flash is the call for the PMI manufacturing final.

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.