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French business climate resilient despite social unrest

French business climate resilient despite social unrest

Latest business climate figures show French companies in most sectors remained undeterred by recent social unrest. Sensitivity to consumer demand seems high but there’s certainly no sense of panic

The main business climate indicator decreased slightly from 105 to 104.5 in January. Considering it is a 10-month low, it could be taken as bad news. However, given the period of social unrest that France, and especially its capital region, endured between mid-November and mid-January, this figure is a positive sign that business was far from being disrupted.

In manufacturing, sentiment bounced back to its long-term average in December; recent output was higher than expected. Although business sentiment as far as the general outlook is concerned hit a one-year low for the second month in a row, there are encouraging signs for future activity: confronted with lower order books since last summer, companies managed to slash inventories which should lead to higher rates of capacity utilisation should new orders recover.

In the service sector, sentiment remained stable in January at 107, and well above its long-term average. If it were not for business worries about the general outlook (a component that deteriorated in January on the back of social unrest), sentiment would have increased thanks to additional hiring and more investment intentions. As for that, almost half of the companies surveyed reported having hiring difficulties. There is also generally no sign of weakening demand, but some sectors do show signs of softness, notably hospitality which was more affected than others by recent transport strikes Overall, the survey shows that if there were weaknesses, they should be temporary.