March Flash PMI: Demand Weakness Reduces Inflationary Pressure

The French March flash PMI was below consensus for both services (47.8 vs 48.8 cons, 48.4 prior) and manufacturing (45.8 vs 47.5 cons, 47.1 prior), prompting a 30 tick spike in Bund futures on release. The composite reading was 47.7, and has been in contractionary territory since May 2023. A deterioration of demand continued to push output lower, but also meant inflation pressured moderated.

Key notes from the release:

• "March’s slightly faster contraction was driven by a quicker drop in services activity, which firms in the sector attributed to weaker sales conditions."
• "On the other hand, the slump in manufacturing production alleviated further with output down by the lowest degree since January 2023".
• "Both manufacturers and service providers registered steeper reductions in sales, with anecdotal evidence pointing to client hesitancy, challenging economic conditions and inflationary pressures as drags on demand".
• "Job losses were confined to the manufacturing sector as net employment rose again at services companies".
• "For the first time since last November, both manufacturing and services firms registered higher input prices on the month".
• "Prices charged for French goods and services rose, albeit only mildly and to the weakest extent in just over three years"... "Strong competition reportedly motivated some companies to reduce their prices charged".