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Economy in Brief

French Industry's Outlook Improves
by Carol Stone September 30, 2004

The business climate is improving in France. Seen easily in the chart alongside and the table below, French businesses are experiencing a rising production trend and improving order books. The price situation has also shifted markedly over the past six months.

INSEE's Business survey for September, published today, highlights the "business climate index" at 106, its highest since April 2001 and the 11th successive month above its long-term average (100). An upturn in the general trend of industrial production is a main contributing factor, reaching +12 in September, a third month of positive readings after a dip in the spring. Order books, while still diminishing on balance, are much less weak than they were just six months ago. Foreign manufacturing orders, especially, are approaching a steady position; averaging -6 in the third quarter, they are maintaining their least unfavorable levels since early 2001.

The price situation appears somewhat murky. The assessment of "general industrial prices" is now highly positive, +23 for the last three months running. A year ago, it stood at -9. We'd surmise that the shift in the euro earlier this year from its long uptrend to a more neutral pattern, along with the surge in energy prices, is the major swing factor in this price behavior. Sales price expectations are also firmer than they were a year ago, as slightly more firms believe they can raise prices than not. Even so, this measure of selling prices continues to exhibit much less strength than the general price index, a hint that a price and profit squeeze may be developing for French industry.

Seasonally Adjusted Balance (except as noted) Sep 2004 Aug 2004 Jul 2004 Sep 2003 2003 2002 2001
Business Climate Index* 106 105 105 94 95 97 102
Industrial Production Trend 12 7 3 -25 -29 -22 -23
Factory Order Books -11 -11 -12 -30 -26 -22 -7
Factory Order Books -- Foreign -5 -6 -6 -23 -21 -17 -10
General Industrial Prices 23 23 23 -9 -7 3 12
Likely Sales Prices 1 -2 -4 -10 -7 -5 -1
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