Business Confidence In Germany And France

Overall business confidence in Germany and in France improved slightly in November. Confidence in both countries, however, is still subdued.

In Germany, confidence is measured in two ways: (1) as a percent difference between the optimists and the pessimists regarding a particular question and (2) as an index based on the percent differences with the year 2000=100.  Although the excess of pessimists over optimists regarding the current situation continued to decline in November, there was still a significant excess, 25.1%.  Germans have been much less pessimistic regarding the outlook six months ahead and in November there was actually a small, 0.2%, excess of optimists over pessimists on the outlook.   The overall climate indicator, which is a combination of present conditions and future expectations, improved but still showed an excess of pessimists over optimists, 12.9%.  (The percent balances between the optimists and pessimists for the three indicators are shown in the first chart.)

In France, the measures of confidence are so constructed by INSEE (Institute National de la Statistiques et des Etudes Economiques) that the long term averages are equal to 100.  In November, all the indexes: overall confidence at 87, confidence in the construction industry at 93, industry at 89 and services at 86 are still below their long term averages. (The French business confidence indicators are shown in the second chart.)  INSEE also publishes turning point indicators that attempt to detect at the earliest possible moment turning points of the business cycle.  The series tracks the difference between the probability that the economy is growing versus the probability that it is contracting and  is evaluated between +1 and -1.  A value of +1 indicates that the economy is growing strongly, and one of -1 indicates that the economy is contracting sharply.  A value close to zero indicates an economy near to its long term average and is neither growing nor contracting significantly.  (Turning points for the Composite and the Industry Survey Indicators are shown in the third chart.)  The Composite turning point indicator has been at +1 now for five months, indicating continuing recovery. The turning point indicator for the Industry Survey, however, has been falling and in November was negative, suggesting at least some deceleration of activity in this sector.  The November Climate indicator for Industry was 89, unchanged from October, after a run of seven increases since March of this year.