French business climate remains stable in May, economy likely to expand 0.3 pct in Q2

French economic growth likely to see just little changes in the second quarter. While consumer sentiment in the euro area has continued to be widely stable at an elevated level, business sentiment has deteriorated more significantly from the very high levels recorded at the turn of the year.

In this vein, and tallying widely with yesterday’s flash French PMIs, which saw the headline composite index fell 2.4 points to the lowest in sixteen months, today’s INSEE business survey results indicated to a fifth straight monthly deterioration in the business climate in May, noted Daiwa Capital Market Research in a report.

Especially, the composite indicator dropped 2 points to 106, the lowest level since last June albeit still one that is well above the long-run average. The deterioration in the latest month was mainly seen in services, wholesale and, to a lesser extent, retail, while conditions in manufacturing and construction were reportedly stable.

Moreover, the employment climate was also judged to have deteriorated a bit but stayed highly favourable by historical standards.

“Overall, we consider yesterday's and today's surveys to be consistent with our French GDP forecast of growth of 0.3 percent Q/Q, the same rate as in Q1 but well down on the 0.7 percent Q/Q rate of Q4”, added Daiwa Capital Market Research.

At 20:00 GMT the FxWirePro's Hourly Strength Index of Euro was highly bearish at -105.669, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -3.95586. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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