FR: Business Climate Indicator

Thu May 24 01:45:00 CDT 2018

Consensus Actual Previous
Level 108 109 109

INSEE found no change in manufacturing sentiment this month. At 109, the May outturn was in line with April's unrevised reading and slightly firmer than expected. However, it was also 5 points short of its level at the start of the year.

The stability of the headline index masked an improvement in both past output (10 after 7) and executives' personal outlook on future manufacturing output (17 after 15). However, order books were only flat (1) while the general industry production outlook deteriorated further (15 after 23).

In fact, elsewhere morale worsened significantly in services (103 after 107) and wholesale (104 after 110). Retail (110 after 11) was also a little less optimistic while construction was only flat (108). As a result, the economy-wide gauge declined 2 points to 106, its fifth successive drop and its worst outturn since May last year.

Today's findings are broadly in keeping with yesterday's flash PMI results which similarly argue for some additional cooling in French economic activity in May.

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.