The October 2026 survey of companies showed France’s services sector contracting at its fastest pace since May. It also showed weakening orders and a more pessimistic outlook.
The final services purchasing managers’ index fell to 46.2 from 51.2 in September. It was also below the preliminary October estimate of 48.4. A reading below 50 indicates that activity declined on balance compared with the previous month; a reading above 50 indicates the reverse.
The reversal followed a return to growth in September. The survey points to a sharper deterioration than the initial October estimate suggested, although the index is not a direct measure of the percentage change in output.
Domestic demand weakens
New business received by service companies fell at its fastest rate in five months. The survey found a sharp reduction in orders from domestic customers, while export demand edged up for the first time in more than a year.
Some respondents linked lower activity to weaker demand, tighter financial conditions and clients taking a more cautious approach. The survey’s economist said domestic demand and investment activity appeared to be stalling as clients put decisions on hold.
Businesses also reported a further decline in employment, extending the period of falling workforce numbers to six months. They cited restructuring, retirements and the end of fixed-term contracts among the reasons for lower headcounts.
Despite the reduction in staffing, companies made modest progress in clearing backlogs of work. That finding sits alongside the decline in new orders: the survey describes conditions reported by participating firms, rather than the experience of every business in France.
Costs rise more slowly
Service providers reported higher operating costs, including fuel, supplier fees and wages. They also increased their charges as they sought to pass costs on to customers. Both input costs and prices charged rose more slowly than in September, however.
The picture for the year ahead was less encouraging. On balance, service businesses were pessimistic about their prospects over the next 12 months for the first time since April 2020. Nearly 28% of respondents expressed negative expectations.
Among those reporting negative expectations, firms cited uncertainty around the 2027 presidential election, geopolitical conditions and the global energy crisis. The figure for negative responses does not mean that everyone else was optimistic.
A broader measure combining services and manufacturing also showed a decline. The composite output index fell to 46.6 in October from 51.1 in September, below its preliminary estimate of 48.4. The survey indicated falling output, new orders and employment in both sectors, with faster decreases in services.
Household confidence also fell
A separate household survey released by France’s national statistics office in October showed consumer confidence falling to 80 from a revised 85 in September. It was the lowest reading since June 2013 and below the index’s long-term average of 100.
Households’ views of their own financial situation deteriorated, and fewer considered it a good time to make major purchases. The survey also found increased concern about unemployment. It measured opinions rather than actual spending or job losses.
The two surveys cover different groups and periods. The household responses were collected between 25 September and 19 October; the services survey gathered data from 12 to 27 October. Their results should not be treated as proof of a single cause or as a complete account of the month’s events.
The services measure is based on questionnaires sent to a panel of around 400 companies, spanning activities including transport, finance, real estate and business services. It captures the direction of change reported by respondents, not a direct estimate of national economic growth.
Featured image: AI-generated illustration.
