French business confidence to continue to improve

The French National Statistical Institute (INSEE) business confidence index for the entire economy is expected to improve from 97 to 98 in May, while the manufacturing index should also increase from 103 to 104. 

The INSEE business survey is a reliable tool that uses a sample comprising 20,000 companies. Historically, a reading of 98 for the general economy is consistent with a GDP growth rate of 0.4% qoq. 

"We expect continued improvement as low oil prices and a weak euro play out, while corporate tax cuts should also filter through to the economy and positively impact business confidence",says Societe Generale.

French business leaders still need to be convinced that these positives can materialise into sustainable growth, which is likely to cap improvement in business confidence. 

Also worth noticing, the PMI business surveys show that the combination of higher input price inflation and lower output price inflation are begin to put a strain on profit margins, which could provide a headwind to business confidence.