FR: Business Climate Indicator

Fri Jan 26 01:45:00 CST 2018

Consensus Actual Previous
Level 112 113 112

INSEE's take on business conditions in manufacturing this month was again very positive. The overall climate indicator weighed in at a slightly stronger than expected 113, matching the post-Great Recession high seen in November.

Most categories made further small gains including past output (22 after 20) and orders (1 after minus 2). Executives' personal outlook on future production was only unchanged (16) but the general industry prognosis (34 after 30) was significantly more optimistic.

However, elsewhere the news was more subdued. Hence, while morale was stable in retail (114), it declined in services (109 after 111), construction (108 after 109) and, in particular, wholesale (106 after 111). As a result, the economy-wide climate index dropped 2 points to 110, a 3-month low. That said, the latest reading remains well above its 100 long-run average.

Today's results are not as upbeat as the flash January PMI but still point to a very solid start by French GDP to 2018.

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.