France's private sector output fell for the first time since October, with the S&P Global France Composite Purchasing Managers' Index dropping to 49.7 in February. The decline reflects weakening demand as political disputes over the national budget stall government spending and corporate investment plans.

The contraction follows months of political turmoil after Prime Minister François Bayrou's government faced a no-confidence vote. Businesses are delaying hiring and capital expenditure, fearing tax hikes or spending cuts. This uncertainty clouds the eurozone's second-largest economy, which had shown resilience despite broader European slowdowns.

Investors now watch for policy clarity from President Emmanuel Macron’s administration. A prolonged stalemate could pressure the European Central Bank to maintain tighter monetary policy, affecting borrowing costs across the continent. Markets will scrutinize upcoming French bond auctions for signs of investor confidence erosion.