March 2025 marked another decline in French economic activity, with the composite PMI dropping to 47.0. The contraction extended the 7-month downturn, driven by weak demand and a worsening private services sector. Services also declined for the second month consecutive month, with the services PMI falling to 46.6. In contrast, the manufacturing sector showed slight resilience, with the manufacturing PMI rising to 48.9, a 26-month high, though still in contraction.

New orders fell again in March, though less severe than February, particularly in overseas export. Input cost pressures eased slightly with input prices rising the slowest in three months.

Amid weakening sales, firms responded by cutting jobs at the fastest pace since 2020. It was noted that workforce reductions were exclusive to the service sector. Factory staffing levels, however, rose for the first time since May 2023.

While manufacturing continues its slow upward trajectory, albeit below the long-run average, services continue to drag the economy down, reinforcing concerns about France's economic outlook in early 2025.

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.