The French private sector contracted overall in October as the composite PMI fell to an 8-month low of 46.8 from 48.1 in September, and the fastest drop since February when trade tensions with the US were heading up. The French private sector has now been in contraction for 14 consecutive months.

The services component also reached an 8-month low, falling to 47.1 from 48.5 in September. Manufacturing showed a marginal improvement, reaching a 2-month high of 48.3 versus 48.2 in September.

Respondents to the survey noted business activity being impacted by a combination of weak demand from customers and a generally negative outlook for domestic economic conditions. New orders continued their contraction, now at almost 18 months, indicating caution among French businesses, prompting companies to reduce order backlogs. The reduction of booked orders at this stage of the cycle is likely to be negative for GDP since it is accompanied by weak demand.

It comes as no great surprise that the export sector was also subdued, although the decline in orders from abroad was less than in September, impacting service providers and goods manufacturers alike.

Today's results mirror yesterday's business climate index which also showed improved sentiment in the manufacturing and a more subdued outlook for services. Political turmoil in France continues to weigh on the private sector. At the same time, there has been no joy in the trade agreement reached between the EU and the United States. Until the US Supreme Court rules on the legality of the tariffs, business activity will likely remain negative.

The manufacturing index is seen at 48.0 versus 48.2 and services unchanged at 48.5 versus 48.5.

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.