Economic Analysis: Eurozone PMI Data
Date: October 23, 2026
Key Takeaways
- France's composite PMI fell to 48.4, indicating contraction in the private sector.
- Germany's composite PMI remained positive at 52.8, but growth is slowing.
- The EUR/USD exchange rate dropped below 1.12 following the disappointing French data.
France's Economic Performance
France's composite PMI fell to 48.4 points in October, significantly below the expected 50.3 points. This decline reflects a contraction in both manufacturing (49.3) and services (48.4), driven by ongoing political and fiscal crises, including recent protests and budgetary concerns. New orders in manufacturing and services also fell sharply, indicating a potential continuation of this downward trend in the coming months.
The yield on 10-year bonds reached 5%, the highest since 2002, with a widening spread to German Bunds, suggesting increased risk perception. Business expectations are at their lowest in 6.5 years, raising concerns ahead of the 2027 presidential election.
Germany's Economic Outlook
In contrast, Germany's economy continues to show growth, albeit at a slower pace. The composite PMI stands at 52.8, indicating expansion for the fourth consecutive month. Manufacturing surprised positively at 54.2, while services stagnated at 51.7. The growth in manufacturing is supported by public spending on infrastructure and defense, as well as investments in AI.
However, inflation is impacting consumer purchasing power, leading to stagnation in new orders for services. The overall economic recovery remains fragile, with external pressures such as rising energy costs due to geopolitical tensions affecting sentiment.
Market Reactions
The release of the French PMI data led to a decline in the euro, with EUR/USD dropping below 1.12. Factors contributing to this decline include weakening economic momentum in France, a high risk premium, and rising oil prices favoring the dollar. The nearest support level for EUR/USD is at 1.1151, while resistance is at 1.1250.
Upcoming ECB Meeting
The European Central Bank (ECB) meeting scheduled for October 28-29 is highly anticipated. Economists expect a pause in rate hikes following recent increases. However, the mixed economic data complicates the outlook. Inflationary pressures may necessitate further tightening, but contracting activity in France and bond market tensions could hinder such actions. The messaging from ECB President Christine Lagarde will be crucial in determining the euro's trajectory in the near term.