Germany expands, France contracts. What October’s factory data say about Europe’s economy

Europe’s manufacturing recovery is showing two contrasting trends. Germany continued to record solid factory growth in October, while France slipped back into contraction, highlighting the uneven pace of the region’s industrial recovery as manufacturers grapple with higher energy costs, supply disruptions and uncertain demand.

The S&P Global Manufacturing Purchasing Managers’ Index (PMI) for Germany rose to 54.2 in October from 53.9 in September, signalling a sustained expansion in industrial activity. France, meanwhile, saw its manufacturing PMI fall to 49.5 from 50.6, moving back below the 50-point threshold that separates expansion from contraction.

The figures suggest that Europe’s industrial recovery is holding up, but the strength of the rebound varies across its major economies.

Germany’s manufacturing sector received support from rising export sales and demand linked to government spending. Output increased for the 10th consecutive month, although the pace of growth eased to its weakest since July.

New orders continued to increase, supported by stronger overseas demand from Asia, North America and parts of Europe. Export sales recorded their second-strongest increase in more than four-and-a-half years, behind only August’s recent peak.

Manufacturers also reported an increase in backlogs of work for the third consecutive month. Employment continued to decline, but the pace of job losses was the slowest since August 2023.

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The improvement comes as Germany seeks to strengthen its industrial base after years of weak growth and pressure on its manufacturing-heavy economy. Stronger export demand and government-linked spending are providing support, although rising production costs remain a concern.

France struggles as demand weakens

The picture was considerably weaker in France.

The country’s manufacturing PMI fell to 49.5 in October from 50.6 in September, ending two consecutive months of expansion. The final reading was marginally better than the preliminary estimate of 49.3.

New orders declined at their fastest pace since July 2025, pointing to a deterioration in demand for French manufactured goods.

The decline in orders also affected production decisions. Manufacturers reduced purchasing activity and employment as businesses responded to weaker demand and lower factory output.

French manufacturers are also facing mounting cost pressures. Firms surveyed by S&P Global reported higher expenses for raw materials, fuel and energy, adding to the difficulty of competing on prices.

“French manufacturing is unable to build any real momentum. Demand conditions deteriorated sharply in October, stacking the odds against a turnaround in the near-term,” said Joe Hayes, senior principal economist at S&P Global Market Intelligence.

He added that rising costs linked to supply disruptions and high energy prices were limiting manufacturers’ ability to price their products more competitively.

France’s industrial weakness also comes against a backdrop of broader economic and political uncertainty. Earlier October business surveys pointed to a contraction in overall private-sector activity, with political instability and concerns about public finances weighing on business confidence.

Europe’s recovery faces an energy cost challenge

Despite the weakness in France, manufacturing activity across the euro zone remained in expansion territory.

The S&P Global Eurozone Manufacturing PMI stood at 52.7 in October, slightly below September’s 52.9 but stronger than the preliminary estimate of 52.4. The reading marked the continuation of the region’s strongest manufacturing growth spell in more than four years.

Six of the eight euro zone economies covered by the survey recorded manufacturing growth. France and Italy were the exceptions.

Factory output across the currency bloc eased to a four-month low, while growth in total new orders slowed. Export orders, however, recorded their strongest increase in more than four-and-a-half years, offering some support to manufacturers.

The recovery is also facing pressure from higher input costs.

Manufacturers reported that operating expenses increased at their fastest pace in five months in October. Higher energy prices and supply-chain disruptions pushed up the cost of production, while supplier delivery times deteriorated to their weakest level since June.

Companies responded by increasing their purchases of raw materials at the fastest pace in nearly four-and-a-half years. They also raised stocks of purchases for the first time since December 2022, suggesting that businesses are building inventories amid concerns about supply availability.

The cost pressures are particularly important for European manufacturers because energy-intensive industries such as steel, chemicals and automotive production are sensitive to changes in electricity, fuel and raw material prices.

The increase in costs could also complicate the European Central Bank’s efforts to control inflation without undermining economic growth.

The ECB left interest rates unchanged at its latest meeting, but persistent inflationary pressures could revive expectations of further monetary tightening. Higher borrowing costs would add another challenge for businesses already dealing with weaker demand and expensive inputs.

What the factory numbers mean for Europe’s economy

The October PMI readings point to a manufacturing recovery that is gaining support from international demand but remains vulnerable to geopolitical tensions, energy costs and uneven domestic conditions.

Germany’s performance offers some encouragement for Europe’s largest economy, particularly as export orders and government-linked demand support industrial activity. But the slowdown in factory output growth and rising input costs suggest that the recovery is not yet free of risks.

France presents a more difficult picture. Falling new orders, weaker production and rising costs indicate that manufacturers are struggling to regain momentum. The country’s broader economic uncertainty adds to the challenges facing businesses.