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Economy in Brief

Service Sector Hits the Skids in France
by Robert Brusca December 21, 2007

The service sector is beginning to ease in France. The index is down form its peak if 113 in October. As a percent of its range the December reading is still in the top 17% of its range. The outlook reading at +3 stands in the 80.6 percentile of its range and is still in the top 20% of that range. Expected sales for the 3-months ahead are in the 67th percentile of their range, the top third, roughly. Employment expectations are still firm in their range. Over the past three months observed employment is nearly in the top quarter of its range whereas expected employment in the three months ahead slips to the top third at a reading of 10 which is in the 68th percentile of its range.

These readings generally show that the outlook is a bit weaker than the current or recent past readings have been. And while the slowdown and drop off is clear on the chart it is also true that the survey levels are still firm; what we must wait and see is how far this expected softening may go.

Insee released today a separate survey on industry in which morale fared much better than for services. It is surprising with the concerns over the strong euro that it is the service sector where morale is fading faster. This could have something to do with the financial turmoil that has been in train, of course. But industry is holding up much better despite its competitiveness pressures. Even in that survey, however, there are more concerns among executives about the outlook for production in their own business sector. French consumer spending on MFG goods in also November worked its way lower showing an unexpected drop. This spending results may have been affected by recent transits strikes.

There is evidence of strain in the French economy. All of these reports will bear watching as we turn the calendar sheet to a new month and new a new year. We will come upon this new year with the economy a bit more challenged than usual in France, across the Euro Area, in the US and elsewhere.

France INSEE Services Survey Jan 2000-date
  Dec-07 Nov-07 Oct-07 Sep-07 %tile Rank Max Min Range Mean
Climate Indicator 108 111 113 112 83.3 18 113 83 30 102
Climate: 3-Mo Moving avg 111 112 113 113 92.8 5 113 85 28 102
Climate: 12-Mo Moving avg 110 110 110 110 99.6 2 110 91 20 101
Outlook 3 5 7 8 80.6 23 9 -22 31 -1
Sales
Observed 3-mos 14 17 18 18 83.3 7 19 -11 30 6
Expected 3-mos 9 13 14 14 67.9 38 18 -10 28 7
Sales Price
Observed over 3-Mos 0 -2 1 2 33.3 33 8 -4 12 0
Expected over 3-Mos -2 2 -1 1 30.0 69 5 -5 10 1
Employment
Observed over 3-Mos 14 8 3 8 73.5 5 23 -11 34 5
Expected over 3-Mos 10 11 17 9 68.2 13 17 -5 22 5
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