• France September flash services PMI 51.4 vs 48.3 expected
• Prior 48.0
• France September flash manufacturing PMI 50.3 vs 50.9 expected
• Prior 51.1
• France September flash composite PMI 51.2 vs 48.7 expected
• Prior 48.5

That is a strong read as French business activity moved back into expansion territory (>50.0) in September, bolstered by a stronger performance in the services sector. Of note, the headline estimate for the services print is the highest in 10 months. That drove the overall expansion to being the quickest in just over two years.

Of note, demand conditions improved and that reflected rising sales activity in the service sector, although employment continued to decline and business optimism weakened further.

New orders rose marginally, marking the first improvement in ten months. Meanwhile, exports became less of a drag on overall sales performance, as evidenced by the softest contraction in new foreign business in the year-to-date.

The more important detail for the ECB outlook and for markets though is the read on price pressures.

The report indicated that inflation across France’s private sector accelerated sharply at the end of the third quarter. Both input and output prices rose at quicker rates for the first time since May as rising cost pressures were passed on to clients via charge uplifts.

Besides that, fuel price increases were frequently mentioned by panel members as a driving force of inflation, as well as component prices, energy and metals.

This chart will be one to watch as investors look to assess the pressure point of the ECB ahead of their next policy decision in October:

Markets were pricing in around 45% odds of a 25 bps rate hike by the ECB for October ahead of this data release. That hasn’t changed by much with those odds sitting at around 47% currently.

The initial reaction seems fairly constrained. However, France has now arguably raised the bar for the PMI readings to follow in terms of any dovish interpretation. If the other reports also show firmer demand alongside accelerating prices, October pricing could become considerably more sensitive.

This article was written by Justin Low at investinglive.com.