France's manufacturing sector is beginning to witness some signs of momentum. The PMI rose to 45.8 in February, marking a nine-month high and signalling the slowest contraction since July 2023. While demand remains fragile, a softer decline in new orders and output suggests the downturn is losing momentum.

Export demand showed resilience, encouragingly, with firms reporting renewed interest from the US, Africa, and APAC. Domestic demand, however, remained weak, forcing manufacturers to cut production and trim inventories. Cost-cutting measures extended to employment, although job losses were less severe than in previous months.

A notable development was the uptick in input costs, which rose at the fastest pace in six months. However, businesses had limited pricing power, resulting in only marginal increases in output pricessuggesting that competition remains fierce and firms absorb much of the rising costs.

Amidst these challenges, business confidence surged to its highest level since last June. Although optimism remains tempered by uncertainty in key industries like automotive and construction, the worst of the contraction may be behind French manufacturers as they brace for a potential recovery. The latest update leaves the RPI at minus 14 and the RPI-P at minus 10. This means that economic activities are slightly behind market expectations in the French economy.

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.