French business confidence to remain unchanged in August

The French National Statistical Institute (INSEE) business confidence index for the entire economy is expected to remain unchanged at 99 in August (historical average=100), while the manufacturing index should also remain stationary at 102.

The INSEE business survey is a reliable tool that uses a sample comprising 20,000 companies. Historically, a reading of 99 for the general economy is consistent with a GDP growth rate of 0.4% qoq, which is also the forecast for Q3 GDP. 

Continued improvement is expected, particularly in the manufacturing sector, as corporate spending and export growth should start to respond to low oil prices and a weak euro. Corporate tax cuts should also filter through to the economy and positively impact business confidence. The hope is that tax cuts and lower oil prices will start to boost profit margins by the end of 2015, and in particular in the manufacturing sector. 

"We maintain the view that French business leaders still need to be convinced that these positives can also materialise into sustainable growth, which is likely to cap improvement in business confidence", notes Societe Generale.