Sentiment in French manufacturing deteriorated just slightly in October according to the latest INSEE survey. At 102, the business climate index was down a point versus its unrevised September level but still within the narrow 101-103 range seen since the middle of the year. Even so, the outturn was on the soft side of expectations.
The dip in morale was largely attributed to slower growth of recent output where the sub-index declined from 9 to 6 and so fully unwound last month's improvement. Total orders and demand were a little weaker (minus 15 after minus 14) and executives' personal outlook on future production flat (9). That said, general industry production expectations worsened somewhat (2 after 6).
Elsewhere, sentiment was also more cautious in services (101 after 102) and retail (100 after 102) but steady in construction (96). As a result, economy-wide morale was unchanged at September's downwardly revised 101 and so held just above its long-run average (100). Today's results are not too different from yesterday's flash PMIs which similarly pointed to a slight cooling in overall business activity this month.
INSEE's business climate indicator aims to summarise the mood of French business leaders. The survey asks questions about output, orders and inventories and expectations for future business. These are synthesised into an overall index of sentiment, adjusted so that the long-run average is 100. The main focus is the manufacturing sector but the survey also provides separate confidence 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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