France’s factory sector remained in contraction at the start of the fourth quarter, even as the final October reading showed a marginal improvement versus earlier estimates. The HCOB France Manufacturing PMI rose to 48.8 in October from 48.2 in September, topping the 48.3 flash print but staying below the 50.0 threshold that separates expansion from contraction. With the exception of August 2025 (50.4), the PMI has been sub-50 since January 2023, underscoring a protracted downturn.

Demand still weak; optimism fades

Survey respondents reported further marked declines in output and new orders, citing political uncertainty at home and hesitant client demand. Geopolitical tensions continued to weigh on external markets, though the drop in export orders eased to its slowest pace since April—a small sign of stabilization rather than a rebound.

“French manufacturers are facing the future with a sense of pessimism,” said Jonas Feldhusen, junior economist at Hamburg Commercial Bank, pointing to persistently weak demand and the domestic political backdrop as key headwinds. Reflecting that caution, the 12-month output outlook turned pessimistic for the first time since January, with 30% of firms expecting production to decline over the next year.

Margin dynamics: price cuts amid easing costs

Intense competition pushed producers to cut selling prices for a second straight month, a move facilitated by a further easing in input cost inflation to its slowest pace in a year. The combination suggests some disinflationary impulse coming from French industry, albeit at the expense of margins.

Labor and capacity signals diverge

Despite weak demand, manufacturing employment rose for a sixth consecutive month, though only marginally, hinting at labor hoarding and efforts to preserve skilled capacity. In contrast, backlogs of work increased at the fastest rate since May 2022, an unusual pairing with contracting new orders that may reflect supply-side frictions, selective strength in certain subsectors, or delays in clearing existing pipelines.

Macro context

The PMI’s dour tone arrives a week after official data showed stronger-than-expected Q3 GDP, aided by surging exports—particularly in aerospace— and firmer corporate investment, despite ongoing political strains. The contrast highlights a two-track economy: resilience in large, export-oriented champions versus persistent softness among broader manufacturing cohorts exposed to domestic demand and European supply chains.

Bottom line

France’s manufacturing slump eased but persisted in October. Softer cost pressures and contained price cuts offer some relief on inflation, yet weak orders, a darker output outlook, and political uncertainty continue to cloud the near-term trajectory. Unless demand firms—domestically or via external tailwinds—momentum is likely to remain fragile into the remainder of Q4.