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Business activity optimism in France softens further in October

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Staff Writer |
French service sector
Europe   Companies foresee a larger rise in capital expenditure

The latest IHS Markit Business Outlook survey signals lower optimism among private sector firms in France.

There is softer confidence towards the 12-month outlook for business activity, new work, revenues and profit, while hiring intentions are unchanged.

However, companies foresee a larger rise in capital expenditure and stronger increases in both input costs and output prices.

A net balance of +29% of panellists predict a rise in business activity over the next 12 months, down from +32% in June.

Survey respondents have mentioned fears of escalating trade wars, higher raw material prices and a weakened euro.

Despite this, confidence towards future business activity is slightly higher than the global (+28%) and eurozone (+27%) averages.

At the sector level, both manufacturers and service providers are less optimistic than in June, the former remaining the least confident of a rise in activity over the next year.

In line with weaker sentiment towards business activity, French private sector companies are less confident about new orders over the coming 12 months.

The net balance of firms anticipating expansion is still positive, at +27%, but the lowest for two years.

Softer confidence towards future sales also sees revenue expectations decline, with positive sentiment the lowest since October 2016.

In coherence with this trend, optimism towards profitability over the next year is revised down to the weakest seen since February 2017.

Services firms are more upbeat towards revenues and profits than their manufacturing counterparts.

In contrast to weaker positivity on revenues and profit, sentiment regarding capital investment in the coming 12 months is the joint-highest for one year.

Moreover, the net balance of French private sector firms planning to increase capital expenditure (+20%) is higher than the global (+13%), developed country (+13%) and eurozone (+17%) averages.

The rise in optimism surrounding investment differs from hiring plans, however.

The net balance of firms expecting employment expansion over the coming year is the joint-lowest since February 2017, on par with that seen in June.

Weaker confidence is driven by manufacturers, who report softer optimism compared to June.

Meanwhile, service providers signal greater belief that hiring will increase.

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