French business activity unexpectedly contracted in October, reversing September's growth, a survey by S&P Global showed on Friday, Reuters reported from Paris. The survey pointed to the sharpest decline in demand for French goods and services since May.

Source: Reuters

The S&P Global French flash services PMI fell to 48.4 in October from 51.2 in September, below a Reuters poll forecast of 50.7. A reading below 50 shows activity shrinking, while a reading above 50 shows it growing.

The flash manufacturing PMI also slipped into contraction, falling to 49.3 from 50.6 in September, against a Reuters poll forecast of 50.5. The composite PMI, which combines services and manufacturing, fell to 48.4 from 51.1, also below the 50.5 forecast.

Surveyed businesses tied the weakness to heightened political uncertainty and economic pressures, Reuters reported. French government borrowing costs have jumped in recent weeks on investor concerns about the country's ability to repair its public finances, while waves of street protests have raised the political temperature ahead of a presidential election in the spring.

“September's rebound in economic activity proved to be short-lived, which is hardly surprising given the rapid tightening of financial conditions and a further increase in political pressure across France during October,” said Joe Hayes, senior principal economist at S&P Global Market Intelligence.

“October figures could be a prelude of what's to come as the survey's sentiment indicator, which explicitly asks firms about their expectations for the next 12 months, sank to a six-and-a-half-year low,” Hayes said, according to Reuters.

France is the euro area's second-largest economy, so a contraction there weighs on the whole bloc. The figures land while France is already dealing with street protests, pressure on its government borrowing costs and a debate over how to repair its public finances — a combination that investors across Europe are watching closely.