The composite index rose to 49.8 in August from 48.6 in July to a 12-month high, showing the French private sector is near to entering an expansionary phase, according to final figures. The services sector also moved to a reading of 49.8 from 48.5 in June.

Respondents to the survey reported an increase in employment to a 15-month high, with hiring coming on the back of increased work backlogs amid a slowing decline in new orders. US tariffs appear to be taking a toll with foreign orders for services falling markedly.

Operating expenses are on the rise, with input price inflation reaching a six-month high. Transportation, wages, and raw materials were more expensive in August, foreshadowing growing inflationary pressures in the pipeline. Companies reported eating some of the increased costs rather than passing them all on to their customers. The question is how long will companies be willing to do so?

On Monday, the manufacturing PMI rose above 50, to 50.4, for the first time since January of 2023, and showing the manufacturing sector is in expansion.

Even with sentiment improving, the outlook for both manufacturing and services remains cautious.

Today's results are a positive sign and lending some fragile underpinnings to the private sector economy. The coming months will see how well businesses digest the 15 percent tariffs and whether businesses will feel pressure to pass along higher costs to their customers. For now, businesses are waiting out to see if a US court ruling deeming most of the tariff's illegal are confirmed by a possible review by the US Supreme Court.

The Composite Purchasing Managers' Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of around 750 manufacturing and service sector companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains the final estimate of the services PMI. The data are provided 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.