An empty café terrace in Montparnasse during a heatwave
An empty café terrace in Montparnasse during a heatwave in May 2026. Some French firms cited extreme heat for August's weaker services activity, though the sector has now contracted for eight consecutive months. STEPHANE DE SAKUTIN / AFP via Getty Images

The eurozone had a good August. France did not.

The S&P Global France Composite PMI fell to 48.8 in August from 49.4 in July, below the 49.5 analysts polled by Bloomberg had expected and marking an eighth consecutive month below the 50 mark separating expansion from contraction. Forecasters had anticipated a small improvement. They got an accelerating decline.

The contrast with the bloc is the story. The flash eurozone composite edged up to 52.1, its highest since last November, pointing to third-quarter GDP growth of around 0.3%, with hiring returning for the first time this year. Germany's manufacturing gauge jumped to 54.1 against expectations of 52.0. S&P Global noted that France posted a further decline while the rest of the euro area recorded its fastest expansion.

Data were collected between 10 and 19 August.

The weakness has one source

The composite figure conceals a split that runs the opposite way to the headline.

French manufacturing improved to 51.5 in August from 49.8 in July, with output growing for the first time since April. The entire downturn came from services, where the PMI fell to 48.4 from 49.6.

Some firms pointed to the weather. S&P Global economist Joe Hayes said the report revealed another month of frail economic conditions, with some businesses — mainly in services — highlighting extreme heat as a reason for lower activity and demand.

That explanation deserves scrutiny rather than acceptance. Heat is a plausible drag on a single month of hospitality, retail and transport activity. It does not explain eight consecutive months of contraction. When French services last fell sharply in March, to 48.3, the reasons cited were subdued demand amid the Middle East conflict, geopolitical uncertainty and client caution ahead of local elections — with new business falling at the fastest rate since July 2025 and international demand dropping at its steepest pace in fifteen months.

The weather is the proximate cause of August's number. It is not the cause of the trend.

Why the divergence matters

France and Germany have now swapped positions in a way that would have seemed improbable a year ago.

Germany spent three years as the euro area's problem economy, dragged down by industrial weakness. Its manufacturing sector has just recorded its best month in more than four years. France, which outperformed through that period on the strength of domestic demand and services, is now the bloc's sole significant laggard.

The composition explains the durability. Services account for the substantial majority of French output, so a services-led contraction is harder to escape than an industrial one — and unlike Germany, France cannot currently rely on export markets to pull it out, because the sector reaching those markets is the smaller half of its economy.

Energy costs remain part of the backdrop. Analysts have warned that a prolonged closure of the Strait of Hormuz could push crude substantially higher, and French services firms cited the conflict directly earlier in the year.

What to watch

The final August PMI will confirm or revise the flash reading, and the services figure is the one that matters.

The second is September. If heat genuinely drove the August decline, the services index should rebound as temperatures fall. If it does not, the heatwave explanation loses its force and eight months becomes nine.

The third is the eurozone comparison. A single member contracting while the bloc expands raises questions the ECB has so far been able to avoid — because a currency union running one monetary policy across an accelerating Germany and a contracting France is a harder problem than one where both move together.