October PMI Shows Diverging Sector Performance

France October flash composite PMI printed above expectations at 45.3 (vs 44.6 cons; 44.1 prior). Services were also better than expected at 46.1 (vs 45.0 cons; 44.4 prior) while manufacturing slipped further into contraction at 42.6 (vs 44.5 cons; 44.2 prior). Some key notes from the release are:

• "Trends [between services and manufacturing] diverged as a softer (albeit solid) fall in services activity contrasted with the sharpest fall in factory production since May 2020. Companies in both sectors cited weak demand as a reason for lower output".
• "Weighing on overall order books was a significant deterioration in new business from abroad" alongside large falls in new work in both sectors.
• There was a "month-on-month reduction in private sector employment, the first since November 2020".
• "Operating costs rose at a sharp and accelerated pace"…."Increased cost pressures were attributed to rising wage bills and higher fuel prices by some respondents". However, competition and discounting meant selling prices rose at a weaker pace than previously.
• Following the release, 10-Year OATs and Bunds saw a 1-2bp bid as the data was hotter than expected, but the details emerging has seen this move pare slightly already. EURUSD currently trades broadly unchanged.