Sentiment in French manufacturing softened slightly in October. At 103, the sector climate indicator was down a point versus its unrevised September outturn and also just below market expectations. The measure remained above its 100 long-run average but this was its first decline since June.
The slippage in the headline reflected some deterioration in all of the main survey areas. Hence, in addition to weaker past output (7 after 11), there were falls in total orders (minus 17 after minus 15), executives' personal production outlook (13 after 14) and executives' general industry production expectations.
Elsewhere the news was generally more optimistic and morale was up a point in retail at 110 and 3 points higher in services at 100. Although construction dipped a point to 90, overall business sentiment still edged a point firmer and, at 101, weighed in above its historical norm for the first time since August 2011.
Today's results should be consistent with a moderate start by the real economy to the fourth quarter and suggest a small rise in the flash PMI composite output index tomorrow. That said, the recovery remains sluggish and, in itself, unlikely to accommodate any meaningful increase in consumer prices.
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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