France's services sector fell in September, with the services PMI slipping to 48.5 and the composite PMI dropping to 48.1 from 49.8 in August, signalling a sharper contraction in activity. Weak demand weighed heavily, as client hesitancy, political uncertainty, and sluggish sales conditions continued to suppress new business. Although the fall in new orders was the slowest since January, the decline has now stretched beyond a year, while overseas demand also weakened.

Firms responded by cutting prices for the first time since May in an effort to stay competitive, even as cost pressures from wages and suppliers remained relatively muted. Despite these challenges, employment remained a relatively bright spot, as staffing rose modestly for a second consecutive month, particularly in sales departments, although job creation slowed compared to August.

Encouragingly, confidence edged up to a three-month high, with some firms hopeful that new offerings could revive demand in the year ahead. Yet sentiment remains subdued by historical standards, constrained by ongoing uncertainty.

Indeed, September's report reveals a shrinking service economy, grappling with weak demand and competitive pressures, but still showing resilience through hiring and cautious optimism for future recovery. This latest update takes the RPI to minus 4 and the RPI-P to minus 7, meaning that economic activities are now within the expectations of the French economy.

The composite is expected unrevised from the flash at 48.4 and services unrevised at 48.9.

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.