France: Stabilisation in business confidence - ING

Julien Manceaux, senior economist at ING, notes that the France’s monthly INSEE survey showed no change in manufacturing, with a reading of 102.8 in February, but this is mainly due to an improvement in the general outlook and recent production trends.

Key Quotes

“Order books remained lower than at the end of 2018 and, for the first time since September, it seems to have taken a toll on the individual production outlook for the next three months. This could therefore negatively impact industrial production in 1Q19.”

“In the service sector, confidence improved, leading to a slight rebound in overall business confidence in February, the first since November last year. PMI indicators were also out to confirm this story. In the service sector, the index rebounded from 47.8 to 49.8 while the composite PMI indicator was at 49.9, indicating stable activity. However, they bode ill for employment growth: at these levels, hiring intentions could soon show signs of weakening.”

“At current levels, activity indicators are only pointing to a limited rebound in 1Q19. If order books continue to deteriorate, the currently expected 0.4% quarter-on-quarter GDP rebound could disappoint.”

“Given the weaker European economic context that is expected in 2019 and 2020, we see no reason to change our main forecast, that GDP growth will return to potential, or 1.3% YoY, in both years.”