France’s Economy Is Contracting, According To S&P Data The Daily Financial Trends

France

According to S&P Global data, for the first time in a year and a half, France’s economic output is declining, following in the steps of Germany.

S&P Global tracked a gauge of French private sector activity and found it plunged in August to the lowest level it had seen since the Covid pandemic-related disruptions of early 2021. Its drop exceeded prior estimates, and if fell below the delineation point between expansion and contraction.

Within the data, it was found that in both services and manufacturing, new orders declined, along with a measure of business confidence. On the whole, service activity was just above expansion level, however manufacturing activity plunged.

S&P Global economist Joe Hayes said, “High inflation and a waning post-Covid boost to demand have led businesses and consumers to cut back on discretionary spending. European economies look set for a challenging run into year-end.”

Output began shrinking in Germany in July, and continued to contract in August according to S&P data. Germany relies heavily on Russian gas supplies from the Nord Stream pipeline, using the gas for everything from heating to electricity, to manufacturing processes. Russian restrictions on gas flows have forced the country to scramble for alternative supplies as it seeks to build reserves, which will be needed to supply heat through winter.

Phil Smith, economics associate director at S&P Global Market Intelligence said Germany is confronting a, “deepening decline in private-sector business activity. Continued weakness in manufacturing is being compounded by a slowdown in the service sector, with surveyed businesses reporting a growing strain on demand from high inflation and increased interest rates.”

In a Bloomberg poll, analysts judged a recession in the 19 member Eurozone as more likely than not, based on the continued increase in energy costs heading toward winter.

The Daily Financial Trends