France’s final manufacturing PMI for February stands at 45.8, slightly higher than the preliminary reading of 45.5 and up from the previous figure of 45.0. Despite the improvements, both output and new orders are experiencing steep declines, compounded by weak demand across the industry.
Price pressures have intensified, with industrial companies citing increased costs for energy, fuels, and materials. This has resulted in poor pricing power, leading some firms to lower their prices to stay competitive.
Slower Decline In Orders
While order intakes are still shrinking, the rate of decline has slowed. Increased sales to regions such as Europe and the USA have been reported, but a broad recovery remains unlikely. Future output expectations just surpass stagnation, with firms expressing mixed feelings about their prospects.
French manufacturing is still under pressure, even with a slight recovery in the headline figure. The latest reading surpasses both the flash estimate and the prior month’s result, though not enough to overturn the broader negative trend. Production levels remain weak, while fresh demand remains sluggish. Fewer new purchases indicate that businesses are hesitant, likely due to ongoing concerns about economic conditions.
Higher costs remain a problem for many. Energy and raw materials continue to weigh heavily on manufacturers, forcing some to absorb the expenses themselves. Discounts have been necessary for certain firms to maintain orders, which in turn impacts margins. Weak pricing power suggests that competition is keeping selling prices from following input costs higher, leading to tight financial conditions.
Although declines in orders appear to be slowing, they have not stopped. Trade with regions like Europe and the US has offered some support, but not to an extent that could shift expectations firmly towards a rebound. Confidence is mixed, with most firms unwilling to commit to a stronger outlook. Plans for future output remain cautious, keeping investment decisions in check.
Impact On Margins
For those watching price pressures, the trend in cost absorption is worth noting, as balance sheets may continue to suffer. If external demand remains fragile and firms are forced to lower prices further, margins could shrink. This makes movements in material expenses critical in the next few weeks. How much flexibility businesses have to navigate these pressures remains uncertain, and limited pricing power adds further strain.
Export sales provide some optimism, but they are not enough to offset the broader challenges. While some manufacturers may benefit from external demand, domestic conditions suggest that any turnaround will take time. Production planning will likely reflect this struggle, and without stronger signs of recovery, hesitation in investment will stay.
Given current conditions, the next updates will be particularly relevant in assessing whether this moderation in the downturn continues or re-accelerates. Trends in pricing behaviour will matter, especially if firms hesitate to pass on costs. The ability of manufacturers to manage tightening margins will be a key area of focus, determining how long this weak demand phase lasts.
