FR: Business Climate Indicator

Wed Jul 22 01:45:00 CDT 2015

Consensus Actual Previous
Level 100 102 100

Sentiment in French manufacturing was unexpectedly high in July according to the new INSEE survey. At 102 the business climate indicator recovered most of June's 3-point drop to stand at or above its 100 long-run average for a fourth consecutive month.

July's rebound was due to a pick-up in past output (7 after 5) and a 5 point rise to minus 17 in total orders and demand. Within the latter, foreign markets gained 6 points to minus 8, their best reading since April. However, industry executives had mixed feelings about the outlook with future manufacturing output seen 3 points lower at 4 but general industry production up 4 points at 1, a 3-month high.

Elsewhere in the economy morale in services climbed 2 points to 97 and wholesale was 1 point stronger at 103. However, retail was flat at 106 and construction slipped a point to 90. As a result, economy-wide sentiment rose just 1 point to 99, but this was still its highest level since August 2011.

Overall today's results are quite promising although with the overall business climate indicator still sub-100 the signs are that the economic recovery remains quite sluggish. That said, the July results bode well for a modest improvement in both the flash manufacturing and services PMIs on Friday.

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.