French Production Trend is Lower but Optimism is Intact

The chart on the left shows that price trends continue to press higher in France but the production trend is sharply lower.

For total industry we find similar results to those in manufacturing. The recent trend of production at -11 is below its mid-point, standing at the 46^th percentile of its range. But the likely trend reading at 51 is in the 87^th percentile of its range, a strong reading. Despite the current slowing and despite high energy and commodity prices and despite financial turmoil and despite a super strong and a still-rising euro, French industrialists have maintained their optimism. Orders are in the 74^th percentile of their range with foreign orders relatively weaker in the 69^th percentile of their range. This is unusual since in other large EMU countries foreign orders have been relatively stronger than domestic orders.

France is an interesting case in several respects. Its budget is now expected to overshoot its target as growth in revenues slow. The Finance Ministry is scaling back its forecast for growth. It is an odd time for businesses to be looking for the future trend in output to deviate so much and to become so much stronger than the current trend in output. Nonetheless, that is what the survey says.