The eurozone's October composite PMI rose to a 29-month high, with Germany’s robust recovery serving as the growth engine while France remains mired in contraction.

Services are the key driver of Germany’s economic growth, with the PMI index surging from 51.5 in September to 54.6—the fastest growth in over two years. This leap not only offset France’s decline but also signals Germany’s emergence from prior weakness. Nils Mueller, economist at Hamburg Commercial Bank, stated: "The German services economy is regaining its footing after a period of sluggishness. A combination of rising demand, renewed hiring, and enhanced pricing power bodes well for the broader economy—though firms remain vigilant about external risks and cost pressures." Employment data corroborate this improvement trend. Service-sector employment, having declined for two consecutive months, posted its strongest growth since April in October, driven directly by a marked increase in new business. Although business confidence dipped slightly from its 16-month high in September, it remains above historical trend levels—reflecting expectations of improved economic conditions over the next 12 months. Manufacturing remains weak, yet output growth edged up modestly. While factory employment continued to fall—and at an accelerated pace—the stabilization of new orders in October (following a drop in goods sales in September) represents relative improvement. Cyrus de la Rubia noted that sustaining this relatively strong momentum will not be easy, depending significantly on whether government stimulus packages can genuinely spur businesses and households to increase investment and spending. France drags down regional growth France’s economic trajectory stands in stark contrast to Germany’s. Its October composite PMI fell to 47.7—the lowest in eight months—and deepened further into contraction territory. The final reading for France’s services PMI stood at 48.0—down from 48.5 in September—marking the 14th consecutive month in contraction and the fastest shrinkage since April. Though better than the preliminary reading of 47.1, persistent political uncertainty continues to weigh on demand. Jonas Feldhusen, economist at Hamburg Commercial Bank, emphasized: "The downward trend in France’s private-sector economy has not eased at the start of Q4." He identified weak demand and political uncertainty as key drivers of the decline. Despite economic headwinds, service-sector employment rose for the third consecutive month—demonstrating some resilience. However, declining backlogs suggest that current hiring trends may prove unsustainable if demand remains persistently soft. Cost pressures eased somewhat: input costs for service providers rose at their slowest pace since February 2021, and service charges edged up slightly after a small decline in September. Overall business confidence remains subdued, with concerns mounting over how domestic political developments might affect future activity levels. Cyrus de la Rubia pointed out that political stability would help improve France’s economic outlook, and passing the 2026 budget bill would represent a significant step in that direction. Although services performed weakly, official data released at the end of October showed that the French economy grew faster than expected in Q3, buoyed by a surge in exports—primarily from the aerospace sector—and a rebound in corporate investment.

The eurozone’s manufacturing PMI hit a three-and-a-half-year high, lifted by Germany’s rebound, while France remains stuck below the boom-bust threshold.

The eurozone’s manufacturing sector displayed several positive signals. The February manufacturing output index rose to 52.1—the highest since last August—and for the first time since then, outpaced the pace of services activity growth. New manufacturing orders posted their first increase after six consecutive months of contraction—the fastest growth in nearly four years. Manufacturing purchasing activity expanded for the first time in three and a half years, albeit modestly. Both raw material and finished goods inventories declined at their slowest rates in 37 and 30 months, respectively. Supplier delivery times lengthened for the ninth consecutive month. Cyrus de la Rubia observed that the manufacturing foundation appears more solid, with most PMI subcomponents—including purchase volumes, future output expectations, and inventory indicators—all higher than in August last year. Yet he cautioned that new orders must demonstrate stronger performance over the coming months before greater confidence in the sector’s outlook can be justified. Germany’s recovery accelerates; France’s growth falters Germany’s economic performance was the primary contributor to the eurozone’s improvement. Its composite PMI rose from 52.1 in January to 53.1, and its services PMI climbed from 52.4 to 53.4—both marking four-month highs. Its manufacturing PMI reached 50.7, exceeding market expectations of 49.5. Cyrus de la Rubia stated this confirms an economic turning point especially evident in January. German industrial orders rose unexpectedly in December—the largest increase in two years. He added that unless a sharp decline occurs in March, Germany’s Q1 GDP is likely to post notable growth, supported by increased public spending on defense and infrastructure, as well as rising overseas demand. France’s economy continues to struggle. Its composite PMI rose slightly from 49.1 to 49.9—marginally better than the market expectation of 49.6—but remains firmly within contraction territory. Jonas Feldhusen, economist at Hamburg Commercial Bank, remarked that France’s private sector still lacks genuine momentum, with demand-side weakness remaining the main drag: new orders declined again, and export orders deteriorated further. A recent survey by the Bank of France suggests the economy may improve later this year, with quarterly growth projected at 0.2%–0.3%, underpinned by strong performance in defense and aerospace sectors. However, unemployment rose to 7.9%—a four-year high—in the final months of 2025. Job cuts continue, demand growth remains modest Despite accelerating economic activity, eurozone firms reduced staff for the second consecutive month. Manufacturing layoffs persisted, while services employment held steady—ending a five-year streak of continuous job growth. Employment fell in Germany, remained flat in France, and rose elsewhere in the eurozone. Notably, Germany’s factory layoff pace slowed to its second-slowest in over two and a half years. Backlogs declined for nearly three consecutive years; the February drop was marginal—the smallest in four months.

French third-quarter growth seen at 0.1%, central bank says

Oct 12, 2026

The Bank of France estimates French GDP grew 0.1% in Q3, noting manufacturing output rose despite sharp increases in industrial raw material prices such as energy and metals. Cost pressures persist as firms pass on only part of the increase to customers.

reuters

2026-10-12

French third-quarter growth seen at 0.1%, central bank says

French third-quarter growth seen at 0.1%, central bank says

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