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Economy in Brief

French Business Survey Decays Slightly in January
by Robert Brusca  February 11, 2020

The Bank of France survey saw a small decay in its headline index to 95.9 in January from 96.3 in December. At 95.9, it is below its 12-month average and farther below its longer average back to 1990. The rank percentile standing for the headline is at 26.6 percentile, a very low standing indicating weakness. The Bank of France looked at its survey today and projected that GDP would advance by 0.3% in Q1 2020 and reverse its 0.3% drop in Q4 2019.

In January, the net balance measure on output change was negative again, but it did improve from December’s -0.7. However, both of these readings are sharply lower than the November reading of 6.3 and the 12-month average of 4.5. There has clearly been a loss in momentum as output change is no longer advancing in either of the last two months. The January reading is also well below its historic median with a 37.1 percentile standing.

However, expected production has come up strongly with a 4.7 net diffusion reading in January, up from 1.4 in December and from 2.4 in November. The 4.7 reading is higher than its 2.4 November value and its 12-month average of 3.1. But it is also below its 5.6 net long-term average reading. Expected production with a 42nd percentile standing is below its median.

Order books are a bright spot with a net reading of 8.1 in January. That reading ticked up slightly from the December reading of 8.0 but is down from November’s 9.5 reading and below its 12-month average of 11.5. However, the January 8.1 reading is above its long-term average reading of 5.4. Even so, the queue standing on this reading is still only at the 57.7 percentile, modestly above its median reading.

Changes in foreign and total new orders have followed similar paths with both remaining weak. New orders of both kinds weakened in December then rebounded in January to levels above their November values; their January levels are at or near their respective 12-month averages and below their respective long-term month averages. Foreign news orders in January have a 20th percentile standing while total news orders have a 30th percentile standing. Both are quite weak and in the lower one third of their respective queues of readings.

Employment vs. one month ago has posted negative readings for four months in a row and in nine of the last 10 months. Declines over the past three months have been at about the same pace, weaker than their 12-month average but above their long-term average which itself is a negative number. Still, employment has a 50.9 percentile standing, nearly on top of its historic median. Expected employment shows positive readings in each of the last two months against a negative reading in November. The current positive reading is below the 12-month average but above its long-term average which also is a negative reading. Expected employment has the strongest standing in this report with an 81.1 percentile standing.

The Bank of France is looking for French GDP to cross over back over to positive growth and gain 0.3% quarter-to-quarter. That annualized rate of 1.2% is slightly below France’s 5-year average for GDP growth. In Q4, domestic demand fell at a -0.3% pace, construction spending fell at a 1% annual rate, both exports and imports fell at a pace of about three-quarters of a percentage point. The BoF is relatively upbeat on the period ahead. Still, this survey remains a weak cog in the outlook.

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