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.
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