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FR: Business Climate Indicator
| Consensus | Consensus Range | Actual | Previous | |
| Index | 94.0 | 92.0 to 96.7 | 94.0 | 94 |
Highlights
The Business Climate Index was 94 in May, matching the April result and the Econoday median forecast. The last time the index was lower was in February of 2021 when it was 91.
Services and retail trade had a negative impact on sentiment, with the former giving a reading of 93 in May compared to 94 in April. The retail sector result was 89, after 94 in April, the worst result since a reading of 60 in May of 2020.
The manufacturing sector on the other hand showed improvement, rising to 102 in May from 100 in April, which is the second consecutive monthly improvement. This can be explained by companies increasing orders and production due to the conflict in the Middle East.
Companies are attempting to get ahead of additional price increases and supply chain bottlenecks. As the conflict shows no signs of resolution anytime soon, that could be a prescient strategy. Indeed, price expectations have increased for all major sectors save for services.
These developments are having a negative effect on employment expectations which showed a decline to 92 in May from 95 in April. That is the lowest reading since 91 in March of 2021.
While the increased sentiment in manufacturing is a positive development to some degree, it is because of external shocks. As shown by the historical lows for some of the components, overall sentiment remains rather bleak and will likely continue to hover at these levels or even worsen.
Market Consensus Before Announcement
Business sentiment seen unchanged at 94.0 in May from April.
Definition
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.
Description
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.