French Business Climate Perks Up- Will It Stay Up?

French business climate in the Insee survey for July rose by two points to stand at an index value of 102, up from 100 (its average) in June. This two-point rise in climate is a gain only exceeded about 14% of the time, marking it as a significant one-month rise. Still, the French climate index stands on in the 61st percentile of its historic que of data, marking the monthly index as moderate.

The recent trend for production logged an increase to zero in July from -3 in June. Its standing marks the 64th percentile of its historic distribution, again a moderate reading. The likely trend, however, was set back this month, falling to 4 from 7 in June. At that level, it holds a 44th percentile standing, below its historic median (at the 50th percentile standing). This is a weak reading and casts doubt on how much we should be impressed by the earlier stronger readings if they are not going to persist.

The reading for orders rose to -17 in July from -22 in June. At that level, the reading has a 57th percentile standing, a moderate reading. Foreign orders improved by more to -8 from -14, marking a 64th percentile standing. French industry is being driven more by foreign orders than by domestic orders; the global economy is still weak, but the euro exchange rate is low.

Inflation expectations remain weak. Expectations rose to -6 in July from -7 in June. At that level, the index has a 27th percentile reading that is weaker historically just a bit more than one-quarter of the time.

While the French industrial reading was upbeat, the consumer reading for Italy in May found a setback to retail sales and a give back to the April industrial orders gain as Italian orders fell in May offsetting about half of the previously reported April gain. Europe continues to give us mixed signals. Japan remains weak. Its all-industry index was set back in a report today, while elsewhere in Asia, China's leading index put in its third straight strong reading. This rise corroborates news from the China Beige Book which has been signaling some revival from China's long slump.

However, global economic conditions are still weak. Greece has still not made its crucial decision on austerity. Commodity market action hardly speaks of any improvement in global demand. Even France's improved Insee survey has some holes in it. Bonafide good news is simply hard to find.