France: Business confidence holds up - ING

Julien Manceaux, Senior Economist at ING, notes that the French business confidence declined in October, with the main index reaching its lowest level since March 2017 at 104, according to figures published this week by INSEE and confirmed by preliminary PMI data.

Key Quotes

“At the same time, the PMI composite indicator rebounded slightly, from 54.0 to 54.3. This comes from the fact that the service sector has more weight in the PMI surveys. Surveys in the service sector showed that activity is still expanding (PMI services increased slightly in October) but, as the INSEE survey showed, expected demand declined together with investment intentions. These declines were limited as hiring intentions remain elevated in the sector, and that's positive for employment gains for the rest of the year.”

“The manufacturing surveys offered a less positive picture with a third decline of the PMI index (from 52.5 to 51.2, its lowest level since September 2016) in October.  The INSEE surveys also showed a drop, from 107 to 104, a level consistent with levels last seen in the early stages of the short recovery two years ago.”

“Activity is still expanding and capacity utilisation remains high (at 85.2%, which is only a notch below the 85.8% registered at the beginning of the year). However, the worst news of the survey came from order books which showed a free fall in October, concentrated on domestic orders as foreign orders remained stable.”