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Economy in Brief

Bank of France Retail Survey Shows a Gain in September...But Not Strength
by Robert Brusca  October 19, 2021

Household Sentiment still short of past peaks
Sales trends in France remain mixed despite a gain in sales volume of 2.8% in September, month-over-month. While the September gain is strong, it still falls short of the August drop in volume of 3.6%. Sales volumes also had fallen in July. Retail spending is still struggling to advance in France.

France is still riding rugged trends in the retail sales. Over three months sales volumes are falling at a 5.7% annualized rate. Over six months volumes are rising at a 1.3% annualized rate. And over 12 months volumes are lower by 1.0%. Among the various product lines in the table, no retail category shows gains over three months, six months, and 12 months in September. Among the eight categories, five show three-month declines, three show six-month declines, and six show 12-month declines.

Retailing in France definitely is not out of the woods. With France also suffering from ‘chip’ shortages, new auto sales are the consistently weakest category and the only category to show sales volume declines over three months, six months, and 12 months in September.

Over three months there are double digit sales volume declines for all industrial goods, textiles, footwear, and new auto sales. The auto sales weakness drags down industrial sales, and it is related to an external factor, global chip supply. Beyond that textiles and footwear, sales both show sharp double-digit losses over three months. But textiles have a much larger gain over six months that puts the three-month drop in a more benign perspective. On balance, there is not much we can identify in terms of trend but there is a lot of sales variability and, at the end of the day, not much strength. This situation is underpinned by household confidence, a series that is still below its two past peak values and currently shows signs of running out of steam. Confidence is above its post financial crisis torpor but is not on a particularly impressive path.

Sales trends are mixed

We see the weakness resonated in the BoF industrial report as well. That survey’s indicator for the industrial sector has a 50.3 percentile standing, putting it barely above its median value on data back to October 1990. But of the nine distinct categories in the table, five of them have queue percentile standings well below their historic medians and, for the most part, in the lower one-quarter of all historic observations. On the other hand, output change has only a top two-thirds standing. Order book size has a firm-to-solid 78th percentile standing. Along with a 76.6 percentile standing for employment gains month-to-month. What is strong - the only element that is really strong - is the expectations reading for employment. Reality-land is mixed with a lot of weakness, but fantasyland is on the moon.

Job market optimism may or may not be the right call. But for now, Frenchmen are optimistic. And optimism does give the economy something to grow on –if it is not wrong. Actions can be driven by expectations. At some point, the expectations will need something more substantial to keep up their profile. Since the industrial survey indicator is only at its 50.3 percentile mark, it is not industrial performance that is driving optimism. And retail sales are not even growing on balance over 12 months so there is not much on the consumer spending side either to underline hopes. But the virus that has been spreading rapidly is beginning to recede and everyone knows that when that happens a period of accelerated growth usually follows.

Business performance has been lackluster

For the time being, there is virus optimism. Infections are down and France is experiencing the end of third wave of infections and the smallest of the waves at that. More importantly, the death curve has remained low and very flat all through the third wave of infections and deaths remain extremely low at only forty-one per day as of October 18. This is progress. Yes, there are still concerns about the future and a desire to increase the vaccinated portion of the population. But the situation with the virus is the one thing that does give a tangible sign of support for optimism. Let’s hope that the industrial jobs and consumer spending data can come in behind these improvements to support and bolster economic growth in the coming months.

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