The January survey reveals a significant decline in the manufacturing business climate, as the indicator dropped to 95, below its long-term average of 100. This decline is driven by shrinking order books, particularly in transport equipment manufacturing, with global order book balances reaching their lowest since 2014, excluding the pandemic. Despite a rebound in past production levels (minus 1 percent after minus 9 percent) and a slight recovery in general production prospects (minus 15 percent after minus 19 percent), these remain below their averages, reflecting persistent challenges.

Sectoral analyses highlight a steep downturn in machinery and equipment goods (93 after 97) and transport equipment manufacturing (99 after 110), underscored by the significant reduction in overall order books (minus 27 percent after minus 18 percent) and foreign order books (minus 19 percent after minus 8 percent). Food manufacturing saw a slight decline (97 after 98), while"other" manufacturing rebounded (94 after 93) due to improvements in foreign orders. Within the"other" manufacturing category, textiles (104 after 99), rubber (89 after 87), and chemicals (90 after 88) recovered, but metal manufacturing declined (91 after 93).

Notably, workforce shortages remain a concern, with supply-side obstacles rising. Inventories are low, and selling price expectations have rebounded (9 percent after 2 percent), suggesting cost pressures persist. Economic uncertainty has eased slightly, yet production limitations linked to sourcing difficulties and demand remain significant challenges.

This landscape underscores the manufacturing sector's struggle to regain stability amid fluctuating demand, supply constraints, and sector-specific vulnerabilities, particularly in machinery and transport equipment production, leaving the RPI at 4 and the RPI-P at 5. This means that economic activities are generally within market expectations of the French economy.

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.