FR: Business Climate Indicator

Thu Jun 22 01:45:00 CDT 2017

Consensus Actual Previous
Level 109 108 109

INSEE's new business climate survey found sentiment in manufacturing little changed in June. At 108, the headline index was just a point short of the unrevised multi-year high achieved in May and well above its 100 long-run average.

The minor dip was largely due to softer past output (10 after 12) and this masked stronger order books (minus 3 after minus 5). Executives' personal outlook on future output (13 after 16) was also less optimistic but general industry expectations (17 after 7) improved significantly.

Confidence in most of the other major sectors was similarly broadly flat (services steady at 103, construction up a point at 104). However, there was a marked improvement in retail (109 after 105) which might mean that June was a good month for household spending. In any event, the economy-wide climate index edged a point higher to 106, its strongest mark since the middle of 2011.

Today's results bode well for tomorrow's flash June PMI report and, if borne out in the hard data, should see second quarter real GDP growth at least match the 0.4 percent quarterly rate recorded at the start of the year.

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.