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France Business Sentiment Improves In October

France Business Sentiment Improves In October

Confidence among French manufacturers improved slightly in October, reflecting better assessment of recent business activity and a further improvement in order books, reinforcing expectations that the economic recovery would continue in the third quarter.

Survey data released by statistical office INSEE on Wednesday showed that the business confidence indicator for the manufacturing sector climbed to 98 points from 97 points in September, indicating a broadly stable business climate. The October outcome matched expectations.

Separately, INSEE reported today that French business leaders expect global and foreign demand to improve in the fourth quarter, continuing the trend from the third quarter.

Sentiment among surveyed business mangers regarding the past change in production rebounded markedly in October, but remained below its historical average. Meanwhile, their views on personal production expectation turned less upbeat.

Manufacturers' order books showed a further improvement, albeit modest, during the month. Stocks of finished products held largely stable.

The survey also showed that general production expectations, which represents respondents' views on the industry as a whole, turned more optimistic in October, and the relevant indicator moved above its long-term average for the first time since July 2011.

"This survey confirms that the French economy is reaching a turning point mainly thanks to better foreign orders," ING Bank economist Julien Manceaux said. "The better figures for the service sector could help unemployment to stabilize in early 2014."

However, the economist expects the improvement to be slow and sees the French economy staying close to stagnation in 2013.

The statistical office further revealed that the composite business climate indicator, comprising all business-sub sectors, stabilized at 95 points in October. Construction firms were slightly more upbeat about their business conditions, while confidence among retailers and service providers weakened.

Underpinning the strength of the French manufacturing sector, data published by the statistical office this month showed that factory production grew 0.3 percent sequentially in August, ending three successive months of declines.

Earlier this month, the Bank of France had lowered its growth forecast for the third quarter to 0.1 percent from 0.2 percent predicted earlier, citing the unimpressive September data that showed a lack of improvement in business sentiment in the backdrop of weaker-than-normal order book levels.

Meanwhile, the International Monetary Fund raised the GDP forecasts for France. The lender expects the economy to grow 0.2 percent this year and expand 1 percent in 2014.

The French economy grew 0.5 percent in the second quarter, following a 0.1 percent contraction in the first three months of the year.

by RTT Staff Writer

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