INSEE published the results of its monthly and bimonthly economic surveys on November 21. Across all major sectors of activity, the business climate declined slightly in November for the second consecutive month. It thus deviates from its long-term average level. Should we be worried about this drop? In reality, the level of the business climate remains compatible with moderate growth.
Furthermore, if the overall business climate declines in November, the business climate in industry, particularly damaged in the October survey, is recovering somewhat, and the employment climate, which had declined significantly in October, also rebounds. Furthermore, if the PMI index flash composite of overall activity in France (S&P Global) fell sharply in November, it could be revised, and the indicators from INSEE and the Banque de France are considered more reliable. The Banque de France forecasts stable activity in the fourth quarter in its monthly economic survey at the beginning of November, like what we had forecast in our last scenario for France. Nothing very new, then. It should also be remembered that the current climate of political and economic uncertainty can affect the feelings of business leaders, without this impact necessarily being lasting, obviously depending on future developments (cf. the previous dropout in July which was then almost entirely recovered in August and September).
The business climate decreased to 96 in November, losing 1 point as in October. It is thus moving away from its long-term average level (100). This drop reflects the decline in the business climate in services (-2 points, after +2 points in October), construction (-1 point, after +0 points), retail trade including automobile trade and repair (- 1 point, after -1 point) and wholesale trade (-2 points, after +2 points in September – bimonthly indicator). The business climate, however, remains very close to its long-term average level (100) in most of these sectors of activity (at 99 for services and construction, at 98 for retail trade), with the exception wholesale trade, a sector for which the business climate stands at 93, its September level.
Despite its slight decline, the current level of the overall business climate (96 in November) remains compatible with moderate growth in activity, the empirical turning point being around 801. Furthermore, the business climate in industry, which had fallen sharply in October (-6 points), has partially recovered (+4 points), and returned to a level relatively close to its long-term average (97 versus 100). , which is rather reassuring for this sector. In addition, the employment climate rebounded (+2 points, after -2 points), returning to a level close to its historical average (99 against 100), which signals good resilience in employment. The slight decline in the business climate in November is therefore clearly not a catastrophe and must be put into perspective. However, it will be necessary to monitor the future evolution of the indicator, with in particular the progress of the finance bill for 2025 (with adoption at the end, we hope), and more generally that of the government.
The most pessimistic will, however, be able to mention the current level of the composite PMI index of overall activity in France (S&P Global). This actually decreases in November to 44.8 according to the publication flash of November 22, i.e. -3.3 points compared to October, and a ten-month low. However, it should be noted first of all that revisions occur very frequently between the index flash (provisional) and the final index. Recently, these revisions have been rather positive (+1.2 points in September and +0.8 points in October), and an upward revision could therefore also occur on the November figure. Furthermore, even at this level (44.8), and despite a theoretical turning point in activity set at 50, the current level of the composite PMI index would only reflect a stagnation in activity, the turning point empirical standing around 45. Furthermore, in a context of significant dispersion of the economic situation between sectors of activity and even within these sectors, the indicators from INSEE and the Banque de France appear significantly more robust than PMI indices, due to a much larger sample of companies surveyed (8 to 15 times more)2.
At the end of its monthly economic survey at the beginning of November, the Banque de France anticipates stable activity in the fourth quarter. This is precisely our forecast in the last scenario (October) for France. This lack of growth in activity would reflect the repercussions of the effect of the Paris Olympic and Paralympic Games (JOP), which would reduce quarterly growth by 0.2 points in the fourth quarter, and underlying growth activity (excluding JOP effect) slightly positive, of around 0.2%.
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1 – See Working Document No. 2023/2 of the Directorate General of the Treasury (October 2023).
2 – See the INSEE Blog article from April 24, 2024.
