INSEE's April survey of sentiment in French manufacturing was surprisingly robust. At 108, the overall climate indicator was up 3 points versus its marginally firmer revised March reading and at its highest level since the middle of 2011.
The improvement was largely attributable to a bounce in past output although there was also a less marked increase in orders. Executives' personal outlook on future production was similarly more optimistic but the general industry outlook deteriorated to a multi-month low.
In fact, other sectors were notably less robust and morale declined in services and, in particular, retail trade. It was also only flat in building. As a result, the economy-wide climate index was just unchanged at 104. This measure has been trending sideways for a while now.
Today's results are consistent with the pick-up found in business activity in the (flash) April manufacturing PMI survey. The sector looks to be narrowing its performance gap with services which should bode well for the durability of the current upswing. The economy looks to have started the second quarter on a reasonably solid footing.
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.