France's private sector economy fell back into contraction in September as the temporary boost from the Olympics wore off, according to flash survey data from S&P Global released on Monday.

The HCOB composite output index dropped to 47.4 in September, down from a 27-month high of 53.1 in August.

This decline pushed the index below the critical 50.0 threshold, signalling a renewed contraction in the private sector, with business activity decreasing at its fastest rate since January.

Manufacturing output saw its largest decline since January, with the decrease largely driven by the larger services sector, which fell back into contraction following strong growth in August, RTT News reports.

Indeed, the manufacturing Purchasing Managers' Index (PMI) dipped slightly to 44.0 from 43.9 the previous month. Meanwhile, the services PMI dropped to a six-month low of 48.3, down from 55.0 in August.

Survey respondents reported a decline in customer numbers following the Olympic Games, with total new orders decreasing at the fastest rate since June.

The private sector's new export business continued its downward trend, extending a decline that has lasted just over two and a half years as of September.

Weak demand led to a further contraction in work backlogs, primarily driven by the services sector, which experienced a significant drop in pending workloads.

Despite the challenges, business confidence improved, with growth expectations reaching their most optimistic level in four months. This positive sentiment was largely driven by the services sector, which saw a notable increase in optimism, contrasting with the negative outlook in manufacturing.

This greater optimism contributed to a slight uptick in hiring activity, with employment increasing marginally, primarily within the service sector.

The survey indicated a significant reduction in cost pressures nationwide, with input price inflation dropping to a 46-month low. As a result of improved margins, firms began offering discounts for the first time since February 2021.

“It is a sad reality; the strong growth in the French economy seen in August evaporated by September,” said Hamburg Commercial Bank Economist Tariq Kamal Chaudhry.

“Our HCOB Nowcast predicts near stagnation in the French economy for the third quarter, compared to the previous one. With this, France joins the group of eurozone economies struggling with significant growth challenges,” he added.