Sentiment in French manufacturing improved slightly in January. At 103 the headline index was up from December's slightly stronger revised 102 to match its highest level since July. It was also a couple of points above the market consensus and now 3 points above its long-run average.

January's modest gain largely reflected stronger past output (11 percent after 8 percent) which hit its highest level since June. However, overall orders (minus 17 percent after minus 15 percent) were weaker despite stronger foreign demand (minus 12 percent after minus 15 percent) and the outlook was again mixed. Hence, general production expectations (minus 7 percent after minus 6 percent) were marginally weaker but personal production expectations (17 percent after 16 percent) a little firmer. Expected selling prices (33 percent after 47 percent) saw a 3-month low.

Across the other main sectors, sentiment was little changed in services (105 after 104) and construction (114 after 115) but stronger in retail trade (101 after 99) and significantly softer in wholesale trade (95 after 102). As a result, the economy-wide index registered 102, down just a point versus December and maintaining the broadly stable trend seen since September.

Today's update lifts the French ECDI to 4 and the ECDI-P to 25, the latter indicating that in general real economic activity is beginning to move quite well ahead of market expectations.

Forecasters see the business climate indicator holding steady at 101 in January.

INSEE is France's National Institute of Statistics and Economic Studies. 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.