Although both are in contraction territory, sentiment in the German economy is more optimistic.
The French economy recorded another sharp contraction in business activity in November, which has been on a downward trend since June.
The manufacturing sector remains the main drag on the overall economy, contracting at the fastest pace in three years.
The picture in Germany is rosier, with the economic slowdown showing signs of easing in the middle of the fourth quarter, as business activity fell at the slowest pace in four months.
The economic outlook is based on S&P Global’s and Hamburg Commercial Bank’s (HCB) latest estimates of each country’s Purchasing Managers’ Index (PMI), which shows what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices.
In France, this month’s PMI is estimated at 44.5, well below the 50 mark that separates growth from contraction.
“The French economy is in a kind of dead end. It looks like geopolitical and economic uncertainty have played a big role here,” said Norman Liebke, economist at HCB.
According to the sub-sector data, pessimism is high in the manufacturing sector of the euro area’s second largest economy: The PMI for factory production stands at 42.6, the lowest since May 2020.
Sentiment in the French services sector is more positive, but subdued. The services PMI for November is forecast at 45.3, a three-month high. However, it is little changed from October’s 45.2.
German economy on the mend
In the euro area’s largest economy, the overall PMI stood at 47.1 in November. Although it’s the fifth consecutive month of contraction below 50, it’s up from 45.9 in October and the highest since July.
“Christmas is approaching and with it some hope for the German economy,” said Cyrus de la Rubia, chief economist at HCB.
“The collective upturn is fueling our growing confidence that a return to growth territory is a plausible prospect, possibly in the first half of next year,” he added.
Manufacturers’ expectations are improving but remain pessimistic. The manufacturing PMI is estimated to have reached a six-month high of 42.3 in November, up from 40.8 in October. However, it is still clearly contracting.
Activity this month was weighed down by a continued fall in demand for goods and services, with firms highlighting the impact of market uncertainty, tighter financial conditions and customers’ efforts to use up their stocks before making purchases.
The services sector is the closest to the 50 mark, with a PMI of 48.7.