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Economy in Brief

Some Improvement in French Business Confidence 
by Louise Curley October 24, 2005

Business confidence in France has been improving since June of this year when the balance of opinion on the general outlook registered 24% more pessimists than optimists. According to data released today by the French Institute of Statistics and Economic Studies (INSEE), the excess of pessimists over optimists regarding the outlook among businessmen has declined to only 1% in October. Over the past five years, business opinion on the outlook has tended to be more pessimistic and more volatile than business opinion of actual trends in production as can be seen in the first chart. The various components of the overall view are shown in the table below.

INSEE also publishes a composite indicator of business confidence. It is based on the balances of opinions on past production, personal production forecasts, inventories, total and foreign order book and demand and general production forecasts and is constructed in such a way that the series has an average of 100 and a standard deviation of 10. According to this measure, business confidence weakened from mid 2004 to April and May of this year and is currently improving. Since late 2001, however, French business confidence has been subdued, ranging much closer to the average than in the past, as can be seen in the second chart.

French Business Confidence Indicators (% Balance) Oct 05  Sep 05 Oct 04 M/M Dif Y/Y Dif 2004   2003   2002  
General Outlook -1 -13 23 12 -24 5 -29 -22
Recent Production Trend 4 4 17 0 -13 12 -8 -8
Order Book and Demand -14 -19 -12 5 -2 -15 -23 -18
Foreign Order Book and Demand -8 -12 -8 4 0 -11 -20 -17
Inventories 13 13 6 0 7 8 10 13
Prices -4 2 2 -6 -6 1 -7 -5
Composite Synthetic Indicator* 102 100 108 2.0% -5.6% 105 95 97
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