INSEE's latest manufacturing survey found a slight improvement in sentiment this month. At 103, the climate indicator was up a point versus its unrevised June level and so defied expectations for a small decline.
The headline improvement was largely due to an unwinding of the slump in past output reported last month. Having dropped from 13 in May to minus 1, the sub-index recovered to 10 at the start of the quarter, in line with its April outturn. Orders and demand (13 after 14) were little changed and a worsening in executives' personal outlook (3 after 9) contrasted with a modest improvement in the general industry production outlook (3 after 1).
Elsewhere confidence also gained ground. Hence, the climate indicator rose 1 point to 96 in construction, 2 points to 104 in wholesale trade and 3 points to 105 and 101 in retail trade and services respectively. As a result, the economy-wide measure was up a couple of points at 102, equalling its strongest reading since July 2011 and 2 points above its long-run average.
Today's results suggest little initial impact from the Brexit vote and make for some upside risk to tomorrow's flash July PMI.
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.