Political Uncertainty in France's Services Sector

Political uncertainty in France is impacting the country's services sector, according to a recent survey. The HCOB France services Purchasing Managers' Index (PMI) dropped to 46.9 in November, a decrease from the 49.2 recorded in October, signaling a contraction in the sector's activity.

The final reading showed a slight improvement over the flash services PMI of 45.7 points reported earlier in November.

The broader final composite PMI, which encompasses both services and manufacturing, also declined, registering at 45.9 points in November, down from 48.1 points in October. This marks a continuous loss of momentum for France's services sector, which has experienced three consecutive months of decline.

The temporary boost in business during the summer, attributed in part to the Paris Olympics, has since been overshadowed by growing political concerns.

Hamburg Commercial Bank economist Tariq Kamal Chaudhry commented on the downturn, noting that the positive trends observed during the summer months were fleeting. He highlighted that recent data underscores the vulnerability of business sentiment amid the political uncertainty surrounding Prime Minister Michel Barnier's government.

The potential collapse of Barnier's minority government, particularly due to a budget deadlock, is adding to anxiety within the French business community.

Furthermore, the survey indicated that French business confidence in November fell to its lowest level in over four years, reflecting the apprehension felt by businesses amid political instability.

This situation and the subsequent impact on the eurozone's second-largest economy remain a focal point of concern for investors.

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