France business confidence to continue to improve

The French National Statistical Institute (INSEE) business confidence index for the entire economy is expected to improve from 97 to 98 in May, while the manufacturing index shouldalso increase from 103 to 104. 

Historically, a reading of 98 for the general economy is consistent with a GDP growth rate of 0.4% qoq; this is in line with our growth forecast for Q2.

Continued improvement is expected as low oil prices and a weak euro play out, while corporate tax cuts should also filter through to the economy and positively impact business confidence. 

Also worth noticing, the PMI business surveys show that the combination of higher input price inflation and lower output price inflation are begin to put a strain on profit margins, which could provide a headwind to business confidence.