FR: Business Climate Indicator

Thu Mar 22 02:45:00 CDT 2018

Consensus Actual Previous
Level 111 111 112

INSEE's March business survey was slightly less upbeat than in February. The manufacturing climate indicator weighed in at 111, a 1 point dip versus its unrevised mid-quarter reading but in line with market expectations and still comfortably above its long-run average (100).

The headline fall reflected softer past output (16 after 19) and a minor decline in orders and demand (1 after 2). There was also a decline in executives' personal outlook on future production (11 after 15) as well as a decrease in the general production outlook (27 after 30).

Elsewhere, the news was more mixed. Hence, morale improved in construction (107 after 106) and wholesale trade (109 after 107) and was flat in services (107). However, retail trade (113 after 115) saw a worsening in sentiment which could prove ominous after recent weakness in retail sales. As a result, economy-wide sentiment shed just a point from an upwardly revised February level to stand at still solid 109.

Today's results are in line with some modest cooling in French economic activity this quarter and suggest a slightly softer tone to the March flash PMI survey, due for release very shortly.

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.