FRANCE: National Assembly To Vote On Revenue Section Of PLFSS Today
The French National Assembly will vote on the revenue section 2026 Social Security (PLFSS) bill today. This will be an important barometer ahead of next Tuesday’s vote on the full PLFSS. If the PLFSS fails, the more controversial draft State Financing Bill (PLF) will be seen as effectively defeated as well. Uncertainty around the outcome of budget negotiations has kept a political risk premium embedded in OATs, with the 10-year OAT/Bund spread unable to test 70bps during recent narrowing episodes. Passing of a 2026 budget would be seen as an important short-term relief for French bonds, even if it comes at the cost of less fiscal consolidation than initially hoped for.
- A reminder that PM Lecornu's initial target was for a 2026 budget deficit of 4.7%. The median analyst surveyed by Bloomberg currently pencils in a deficit of 5.4%, unchanged from the 2025 target.
- Yesterday, Lecornu was able to broker a compromise amongst parliamentary groups on increasing the generalized social contribution (CSG) on capital income. To keep centre-right parties on board, the policy will raise E1.5bln instead of the E2.8bln initially pencilled in (here)
- Meanwhile, in a concession to the Left this morning, the Government announced there will be no increase in medical deductibles in the PLFSS (here)
- While these decisions have retained a degree of cautious optimism around budget talks, there remain risks. Former PM Barnier (from the conservative Les Republicains party) wrote in an op-ed today that he would not vote for the PLFSS in its current form. This follows similar signals from the Horizons party earlier this week (here)
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
EUROZONE DATA: Oct PMIs: Growth Momentum Improving Everywhere Except France
The October PMI round signalled a positive start to Eurozone growth momentum in Q4. With Q3 flash GDP having already printed above the ECB's September projections, the case for unchanged policy rates going forward is growing. However, some ECB officials remain cognisant of downside risks heading into 2026.
Following upward revisions in France and Germany, and stronger-than-expected readings in Italy and Spain, the Eurozone services PMI was revised up to 53.0 (vs 52.6 flash, 51.3 prior). With the manufacturing PMI confirming flash estimates at 50.0 on Monday, this left the composite reading at a 29-month high of 52.5.
At a country level, France's underperformance amid ongoing political uncertainty remains stark.
Summary from the final October composite PMI release:
- "The euro area economy saw its strongest expansion since May 2023 during October, with growth accelerating and tentatively pointing to a breakout from the subdued trend seen in the first nine months of the year. This sharper upturn was supported by improved demand conditions as new business rose at the steepest pace for two-and-a-half years. Employment growth meanwhile quickened to a 16-month high, despite a slight weakening of businesses’ year-ahead activity expectations".
- "As for prices, input cost inflation eased for a second month running, taking it further below its historic average. Euro area companies were more aggressive with their price setting, however, lifting their charges to the greatest extent in seven months"
UK DATA: Upward Revision To Oct Services PMI, But Fall In Employment Still Noted
Momentum in UK services activity remains positive, though October’s 52.3 final read remains below August’s 54.2. While stronger new orders supported the aggregate index, another reduction in employment numbers and easing output charge inflation will be noted by the BOE.
Key notes from the UK services PMI release:
- “Survey respondents cited a gradual turnaround in new work and sales opportunities, despite elevated business uncertainty and delayed decision-making among clients”
- “Anecdotal evidence suggested that a rebound in order books and successful new product launches had helped to boost business activity in October.”…“Stronger order books appeared to reflect rising domestic demand, with service providers noting increased marketing spending and greater sales enquiries. In contrast, new work from abroad decreased for the second month running”
- “October data pointed to only a slight reduction in employment numbers across the service economy” … “Where a reduction in headcount was reported, this mainly reflected efforts to offset higher payroll costs through the non-replacement of voluntary leavers.”
- “Input cost inflation remained historically strong , but moderated for the second month running to its lowest since November 2024. Higher salary payments were commonly reported”
- “ Average prices charged by service providers meanwhile increased at the slowest pace since June,”
MNI: UK OCT FINAL SERV PMI 52.3 (51.1 FLASH, 50.8 SEP)
- MNI: UK OCT FINAL SERV PMI 52.3 (51.1 FLASH, 50.8 SEP)
- UK OCT FINAL COMPOSITE PMI 52.2 (51.1 FLASH, 50.1 SEP)
