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Economy in Brief

Business Sentiment Up in Italy, Down in France
by Carol Stone April 29, 2004

Business leaders in France and Italy tend to think alike, as suggested by the chart at left. The French "General Outlook" index for production has a 75% correlation with the Business Confidence Indicator in Italy.

However, in recent months, these gauges have had opposing moves. In France, a firm recovery in business sentiment during much of 2003 looks to be fading, as the INSEE outlook measure for April slipped back below zero. In Italy, though, improvement persists after a brief setback right at year-end 2003. The "business outlook indicator" sits at 96.5, its highest since May 2002. The accompanying measure of the current assessment of orders for total industry gained from -17 in February and March to -12 in April, also the best reading since the spring of 2002.

Possibly, these divergent movements -- and they're not dramatic, so we shouldn't make too much of them -- are tied to currently uncertain prospects for prices. In France, the "general industrial price level trend" jumped in April to +18 from +6 in both prior months, but expectations for selling prices deteriorated to -6, the weakest in seven months. We can surmise that rising commodity prices, especially for energy, are pushing up input prices, but clearly businesses in France are not optimistic about being able to pass those through to their customers.

In Italy, though, forecast sales prices remain firm. At +11 in both March and April, this is the most favorable outlook for pricing in over three years. Thus, it looks that a better market tone is keeping Italian business executives relatively more upbeat than those in France.

% Balance, except where noted Apr 2004 Mar 2004 Feb 2004 Year Ago 2003 2002 2001
France INSEE Survey:
Outlook for Production Trend
-10 5 11 -60 -29 -22 -23
Price Trend 18 6 6 1 -7 3 12
Likely Sales Price -6 -3 -1 -6 -7 -5 -1
               
Italy ISAE Survey: Business Confidence Indicator (1995=100) 96.5 93.6 92.7 90.5 92.4 93.9 91.9
Total Industry Assessment of Orders -12 -17 -17 -23 -19 -15 -14
Production Forecast 20 19 18 11 14 16 13
Selling Prices 11 11 9 8 6 6 8
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