French Private Sector at Lowest Since November 2020, Says S&P Global

Significant Contraction in Both Services and Industry Sectors

The downturn affects the entire private sector. The Flash PMI for the services sector activity stands at 42.9 in May, compared to 46.5 in April, also reaching its lowest point in 66 months. On the manufacturing side, production falls back into negative territory after April's rebound, with the production index dropping over six points to 46.4. The Flash PMI for the manufacturing industry declines to 48.9, compared to 52.8 in April.

Companies surveyed by S&P Global attribute this reversal to the impact of the conflict in the Middle East, which has generated strong pressures on fuel and energy costs as well as an economic uncertainty climate. Some manufacturers also mention the rising costs of raw materials as a factor deteriorating their activity.

Demand in Freefall, Employment Declining: Warning Signs Multiply

The overall volume of new business saw its sharpest contraction in May since November 2020, reflecting a significant deterioration in demand. The decline is particularly pronounced in the services sector. On foreign markets, demand is falling at its fastest pace in eighteen months, indicating a less favorable international environment as well.

Employment, which had increased modestly during the first four months of the year, turned downward in May, with the contraction rate reaching its highest level since February 2025. Despite these job cuts, the volume of ongoing business in French private companies is significantly decreasing, at a pace unmatched in fifteen months. The twelve-month activity outlook has also turned pessimistic — a first since November 2024 — with a level of pessimism not seen since April 2020, at the onset of the pandemic.

Cost Inflation at Highest in Three Years: Stagflation Looming

Alongside the contraction in activity, price pressures are clearly increasing. Cost inflation reached its highest level since March 2023 in May, with the corresponding index having risen by more than thirteen points since February. The manufacturing sector recorded the sharpest rise in input prices, with manufacturers frequently citing the increased cost of metals, oil, and their derivatives. Service providers, on the other hand, attribute their cost increases to the rising prices of fuel and energy.

Companies are partially passing on these increases: charged prices are rising at their fastest pace in three years, with the corresponding index rebounding nearly five points since February. Joe Hayes, Principal Economist at S&P Global Market Intelligence, points out that « the surge in oil prices has directly impacted households and businesses, now facing soaring prices at the pump, and also indirectly, by affecting transportation and production costs."

According to the economist, « the sharp drop in new business observed in May in the private sector already indicates, worryingly, that the oil shock has clearly increased the risk of recession in the eurozone's second-largest economy. » The final PMI results will be released on June 1 for manufacturing and June 3 for services and composite indices.