FR: Business Climate Indicator

Thu Feb 22 01:45:00 CST 2018

Consensus Actual Previous Revised
Level 113 112 113 114

Business sentiment in manufacturing deteriorated in February according to INSEE's latest survey. At 112, the latest reading was 2 points short of January's upwardly revised mark but still well above its long-run average and amongst the highest reported in recent years.

The headline drop reflected softer past output (18 after 23) but, more importantly, masked stable orders. That said, executives' personal outlook on future production was less optimistic (16 after 20) and their general industry outlook (30 after 34) was similarly worse than last time.

Elsewhere morale was down in services (106 after 109) and construction (107 after 108) and flat in retail. As a result, the economy-wide climate indicator slipped a couple of points to 109. Today's findings are broadly in keeping with yesterday's flash PMI which also pointed to some cooling in economic activity but a still historically high rate of business activity.

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.