INSEE's latest survey of manufacturing suggests that the sector had a good May with both current output and new business remaining at healthy levels and expectations turning more optimistic.
The headline climate indicator was unchanged but, following a small upward revision to April, at 109 still exceeded market expectations. It was also its highest reading since the middle of 2011. Recent past output (15 after 18) and new orders (minus 5 after minus 4) dipped only slightly after strong gains in April. At the same time, executives' personal outlook on future production (14 after 13) and the general industry production outlook (7 after 1) pointed to rising confidence.
Elsewhere, the picture was more mixed and sentiment in services was actually a little softer. Even so, the economy-wide climate indicator still rose a point to 105, equalling its strongest mark in six years.
Today's results bode well for the upcoming flash composite PMI survey, due for release very shortly. They also suggest that second quarter real GDP growth should see a significant acceleration.
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.