In December 2024, French factory production fell at its strongest pace since May 2020, due to a ‘substantial’ weakening of new order inflows, the latest HCOB France Manufacturing Purchasing Managers’ Index has found.
The PMI for December 2024 fell to 41.9, down from 43.1 in November, marking its lowest point in 55 months and indicating a sharp contraction in the manufacturing sector.
“The French industrial crisis deepens,” commented Dr Tariq Kamal Chaudhry, economist at Hamburg Commercial Bank. “The HCOB PMI for manufacturing has once again sent negative signals in December. Excluding the COVID-19 pandemic, the sector’s output is now falling at its fastest pace since 2009. Public debt remains a significant issue, exacerbated by the country’s political instability.”
Political challenges
Chaudry added that ongoing government challenges in France – such as the recent ousting of prime minister Michel Barnier – are only serving to exacerbate the already-tenuous situation.
“President Emmanuel Macron has yet to establish a strong government capable of taking the necessary steps to address the deficit through a mix of spending cuts and revenue increases,” he added. “François Bayrou, recently hastily appointed as prime minister, also lacks a clear majority and, like his predecessor Michel Barnier, is reliant on the political fringes to pass the 2025 budget.”
According to the data, which was compiled by S&P Global, new orders, both domestic and international, continued to decline, with respondents citing reduced interest from clients in the automotive and construction industries.
Export demand also weakened, with lower sales to customers in other parts of Europe contributing to the downturn.
Responding to this decline in sales, French manufacturers were forced to cut production and reduce input purchases, extending a trend of declining output that has lasted more than two-and-a-half years. Inventory levels also saw sharp reductions.
Employment demand in the French manufacturing sector declined further in December, with the rate of job cuts accelerating compared to the previous month – however despite this, backlogs were cleared at the fastest rate for more than four-and-a-half years, indicating subdued demand for goods.
Future outlook
Looking ahead, business sentiment remains pessimistic, due to fears over a protracted downturn in demand, uncertainty in political circles, and subdued investment plans.
“2025 is unlikely to be easier,” Chaudry commented. “Surveyed companies have little hope for the new year. Future output expectations for the next twelve months remain negative.
“According to the surveyed industrial firms, domestic political uncertainty and low customer investment willingness weighed on confidence. It is therefore unsurprising that French industrial companies made significant layoffs. Reflecting the pessimistic outlook of companies surveyed by S&P Global, the French central bank has also lowered its growth forecast for 2025 from 1.2% to 0.9%, citing ‘heightened uncertainty’ for economic prospects both domestically and internationally.” Read more here.
