French Economic Sectors Erode in August

French manufacturing and services sectors weakened in August. The climate indicator for industry fell to 96.2 from 100.7 and sits in the lower 20% of its historic range of values. The services indicator fell to 100 from 101.6 and has a queue percentile ranking in its 42.7 percentile, a standing below its historic median, but relatively stronger than the standing for industry.

Manufacturing Manufacturing production expectations weakened in August to -9.5 from -8.7 in July.

For production itself, the recent trend fell sharply to a -5.4 reading in August from 9.2 in July. Survey respondents present their own industries’ likely trend as stronger, giving it a +1 reading in August compared to a -4 reading in July. This means respondents were considerably more negative on the economy overall while expectations for their own individual industries were for conditions to improve.

Orders and demand in August fell sharply to -21.4 from -14.8 in July. Foreign orders and demand also fell sharply on the month to -15.3 from -5.1 in July. Inventory levels in general crept higher in August from July as July had crept higher from June.

Price trends in their own industries are still showing pressure, but less than in July, as the August reading was 2.8 compared to 6.9 in July. However, for the overall manufacturing price level, respondents saw overall stronger pressures, logging a 5.0 reading in August compared to 4.3 in July.

All the components show weaker values in August 2023 than in August 2022 with the sole exception of a slightly larger reading for inventories.

The percentile standings are calculated on data back to 2001; that process produces an overall percentile standing in manufacturing at the 20th percentile. For manufacturing production expectations, a 33-percentile standing emerges; the recent trend and the own industry or ‘personal likely trend’ for production are both weak standings, at their respective 16th and 18th percentiles. The orders and demand category has a 32.8 percentile standing with foreign orders and demand at a 36.8 percentile standing. Prices shown as ‘own industry’s likely trend’ are at a 47-percentile standing with the manufacturing price level at a 40.9 percentile standing. The only strong ranking in the table is for inventories; they have a 95-percentile standing and are rising. An environment where everything else is weak as inventories rise likely suggests undesired building. The INSEE manufacturing survey is weak and weakening.

Services The INSEE services survey also shows below-median results but not generally as weak as for manufacturing. The climate indicator has a ranking at a 42.7 percentile while the outlook has a 46.6 percentile standing; observed sales over the last three months, for example, have a 27.7 percentile standing. These are all weak numbers and stand below their respective medians. The services table (below) presents climate rankings for the 12-month average and the three-month average as well as the current period. It's clear that the more recent period rankings slip indicating that there is steady ongoing slippage in climate.

In August the outlook slipped slightly to a -6 reading in August from -5 in July, a modest step down. Observed sales over three months fell to a -4 reading from +1 in July, while sales expected over the next three months fell to a -1 reading from +1 in July.

Sales prices observed over three months slipped to a level of 8 from 12 in July. Sales prices expected over the next three months increased slightly from the expectations of a month ago, with a reading of 7 in August compared to 6 in July.

The readings for employment observed over three months are unchanged at -3 in both August and July; however, expectations of employment eroded significantly to a -1 reading in August from +6 in July.

The rankings for observed sales over three months are at their 27.7 percentile as mentioned above, while the expectations for sales over three months are slightly better at a 36.8 percentile standing. Inflation is much stronger in the services sector than in manufacturing, with observed sales prices over three months having a 93.3 percentile standing and expectations over the next three months having a nearly-identically strong 92.9 percentile standing. Employment observed over three months has a 24.5 percentile standing while expected employment has an improved 34.4 percentile standing, but that's still below its historic median.

On balance, we see weakness and slippage in both services and manufacturing. These surveys confirm what we see in other data, namely that the services sector has been a little bit more resilient than manufacturing although both are weakening, and that price inflation is much stronger in services than in manufacturing. Both surveys show weak readings and readings that continue to weaken. While the current slippage is generally slow, it is clear and ongoing.