| Consensus | Consensus Range | Actual | Previous | |
| Composite Index | 43.5 | 47.6 | ||
| Manufacturing Index | 52.5 | 51.9 to 52.7 | 48.9 | 52.8 |
| Services Index | 46.0 | 46.0 to 47.1 | 42.9 | 46.5 |
Highlights
The private sector economy in France put in its worst performance in nearly six years in May, with the composite PMI falling to 43.5 from 47.6 in April. Companies said the conflict in the Middle East was the main driver which is pushing energy and fuel costs higher.
The manufacturing sector which had been lending support to composite result fell below 50 to a six-month low of 48.9 in May from 52.8 in April. The result was for more pessimistic than the median of 52.5 in an Econoday survey of economists' forecasts.
The decline comes after an increase in April which was boosted by firms building inventories and increasing production to get ahead of expected price increases and supply chain constraints. It appears the bill is now coming due.
Services fell to a 66-month low to 42.9 in May from 46.5 in April. Already in a prolonged contraction, the sector continues to suffer from input shortages and higher fuel prices. Economists had expected a far more moderate contraction to 46.0.
Inflation is a major concern among businesses with price pressures the highest in three years which is putting companies in the unenviable position of absorbing much of the increases in order to maintain market share.
It's no surprise then that the outlook among firms for the coming 12 months has soured, becoming pessimistic for the first time since November 2024. The level of negativity is the greatest since the outbreak of the Covid pandemic in April of 2020.
There is nothing positive to see in today's report, with the implications clear that not only France, but the broader European economy will be facing down a scenario of stagflation. This will be a challenge for the European Central Bank when it meets next month to decide on the path of interest rates.
Market Consensus Before Announcement
Some weakening seen with manufacturing expected at 52.5 in the May flash from 52.8 in the April final. Services expected at 46.0 versus 46.5.
Definition
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.
Description
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.