Sentiment in French manufacturing was unexpectedly upbeat in April according to the new INSEE survey. At 101 the business climate indicator was 2 points higher than its March outturn and above its long-run average (100) for the first time since April last year.
The improvement reflected gains in most areas of the survey, notably past output where the sub-index jumped from minus 10 to 3. More significantly, total orders and demand rose a couple of points to minus 18, although not so promisingly this was driven by the overseas component which leapt from minus 12 to 8. The implication is that domestic demand lagged well behind. Executives' personal output expectations slipped 2 points to 6 but the general industry production outlook was up from zero to 3.
However, elsewhere the news was nothing like as positive. Hence, morale in services was down a point at 92 and it also dipped by the same amount in both retail (to 103) and construction (to 88). As a result, the business climate indicator for the economy as a whole was only stable and, at 96, still well below its 100 long-term mean.
Today's results suggest a stronger April flash PMI due shortly but little change in the key composite output index.
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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