The French National Statistical Institute (INSEE) business confidence index for the entire economy is expected to improve from 97 to 98 in July (historical average=100), while the manufacturing index should also increase from 100 to 101. The INSEE business survey is a reliable tool that uses a sample comprising 20,000 companies. Historically, a reading of 98 for the general economy is consistent with a GDP growth rate of 0.4% qoq, one tick higher than our forecast for Q3 2015.

It is expected, there will be continued improvement, particularly in the manufacturing sector, as corporate spending and export growth should start to respond to low oil prices and a weak euro. Corporate tax cuts should also filter through to the economy and positively impact business confidence. However, it is believed that, French business leaders still need to be convinced that these positives can also materialise into sustainable growth, which is likely to cap improvement in business confidence. Also worth noting is that the PMI business surveys show that the combination of higher input price inflation and lower output price inflation are beginning to put a strain on profit margins, which could provide a headwind to business confidence, notes Societe Generale.