INSEE Manufacturing and Services Steady-to-Weaker

The INSEE industry climate index settled lower in March at 95.9, down from 97.0 in February. The index is lower than its year-ago value of 102.1 and since 2001 it has been this low or lower only 7.5% of the time. Despite the sense of some stability in manufacturing in the tabular data for the last year, the chart (of data since 2014) and the table’s own presentation of the queue standing reveals manufacturing to be at a relative weak standing in March.

Manufacturing production expectations have a 34.4 percentile standing but did improve slightly from the February reading of -14.8. The recent trend of production weakens on the month to a lower quartile standing at its 23.7 percentile. The personal likely trend, which is the reading for each respondent gives to the prospects for his own industry, ticked higher in March to a 40.5 percentile standing. That is better than the percentile for industry over all but still below the level that marks the historic median – a standing at the 50th percentile.

Orders and demand as well as foreign orders and demand each weakened. They each have standing at or below their respective 20th percentile around the lower one-fifth of all historic readings. In addition, the March reading for orders and demand are substantially weaker than they were a year ago and the slippage has been worse for foreign orders.

In contrast, inventory level show few changes and are similar to their year-ago readings and close to their historic median.

Prices have moved to lower readings in recent months. However, price trends and level readings are higher than they were a year ago. In terms of rankings, the own likely price trend is at a 61.5 percentile standing, above its historic median while the manufacturing price level has a relatively weak 36.1 percentile standing.

INSEE on services The services climate readings show a very slight easing in recent months and more significant drop from a year ago. The smoothed data echo a modest ongoing slippage. All the rankings are in their respective lower one-third of historic observations.

The outlook improved to -6 in March from -8 in February. It is unchanged over 12 months. Its historic ranking is at this 44th percentile, modestly below its historic median.

Observed and expected services sales trend weakened in March; both are weaker on balance than one-year ago. And both are weak with historic queue standings that are in their bottom 25-percentiles.

Sales prices strengthened in March to zero. But these are weaker readings than one year ago and yet are queue percentile standings that rank above their historic medians, 66.3 percentile for the observed trend, and 54.6 percentile for the expected trend.

Employment strengthened both as observed and expected in March, but readings are still weaker than one-year ago. And they are below their historic means and medians. Employment ranks in its 28.2 percentile as observed and weaker in its 9.5 percentile as expected.

The chart at the top of this report shows the downtrend in place for both services and manufacturing. While services are stronger on balance and weakening less than manufacturing, both sectors are skidding.

However, European analysis requires some perspective since military spending is ramping up in the wake of the U.S. trying to put more of the burden for European defense on Europe. Germany is stepping up military spending and much of the rest of Europe should follow suit. That should also break European trends up to better performance and away from existing stagnant or deteriorating trends, making past trends less important as determinants of future results. We should begin to see wider separation in surveys like these that give results for the observed trend and the expected trend separately.