Bank of France Business Sentiment to remain stable in May

The Bank of France Business Sentiment indicator for the manufacturing sector is likely to remain stable at 98 in May, despite small improvements in the INSEE survey this month. On one hand, a consumption led recovery, with lower oil prices and a weaker euro are the factors supporting business confidence. Indeed, business confidence has increased since last July. 

However, the French business leaders are seemed to be uncertain that the recovery is sustainable as investment remains muted, corporate debt levels are still high and the underlying credit transmission mechanism continues to be relatively weak. Nevertheless, as a consumption led recovery continues and tax cut start to materialize in higher profit margins, business confidence is expected to trend upwards in the coming months, although headwinds such as domestic policy uncertainty are likely to cap substantial improvements, according to Societe Generale.