Sentiment in French manufacturing was surprisingly firm this month according to the latest INSEE survey. At 104, the headline climate indicator was only 1 point higher than in August but this was its third consecutive increase and its best level since August 2011.
September's improvement was built upon an increase in past output and more optimistic business expectations, the latter despite a slight weakening in overall order books.
More generally, economic conditions were mixed. Hence, morale in retail trade climbed a useful 2 points to 109 but there were falls in construction (1 point to 90), services (2 points to 97) and wholesale trade (4 points to 99). As a result, the overall business climate index was only steady at 100 and so again matched its long-run average.
Accordingly, today's survey results are a little more cautious than yesterday's flash September PMI report which indicated a modest pick-up in total output. That said, both surveys point to a stubbornly sluggish economic recovery and suggest that the economy was still lacking any real momentum moving into the fourth quarter.
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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