INSEE's manufacturing survey found little change in confidence this month. At 99, which matched the market consensus, the business climate index was just a point short of its minimally upwardly revised January reading and so in line with what has been a decidedly flat trend since October last year.
That said, the sub-index for total orders and demand dropped 4 points to minus 25 which, with overseas demand steady at minus 15, suggests that the domestic market deteriorated somewhat. At the same time, executives' personal outlook worsened marginally but general industry production expectations were slightly more optimistic.
For the other sectors of the economy news was mixed. Hence, while morale in construction edged up a point to 89, it dipped from 92 to 91 in services and, more worryingly, fell 4 points to 99 in retail. As a result, the overall business climate index in February held steady at 94, its fourth consecutive reading at this level and still 6 points short of its long-run average.
INSEE's findings are more pessimistic than those of the flash PMI which found a sharp improvement in business activity in services that more than offset a renewed deterioration in manufacturing. In practice, something between the two is probably closer to the truth.
The indicator is a measure of the prevailing sentiment among French business leaders. The main focus is the manufacturing sector but the survey provides separate sentiment measures for construction, retail trade and services on a monthly basis and for wholesale trade every other month.
If you are looking for clues on French business sentiment, this survey would be a good starting point. The indicator is based on a survey that asks business leaders about their expectations for new orders and their overall impressions of the economy. The results are a diffusion index that reflects the difference between positive and negative responses as a percentage of the total number of answers. It uses 100 as the dividing line between positive and negative sentiment.
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