French retail and auto-trade confidence falls to 93.2 in October

Insee’s composite business-climate indicator for French retail trade and motor-vehicle sales and repair fell to 93.2 in October, from 95.8 in September. The three-point decline left the gauge further below its long-run average of 100. It is based on company survey responses and describes business leaders’ assessment of trading conditions, not the value or volume of retail sales recorded during the month.

The sharpest deterioration was in the balance of opinion on general activity prospects. That balance dropped to -41.5 in October from -31.5 in September, approaching its May level, which Insee said had not been seen since October 2014 outside the pandemic period. The fall in this forward-looking assessment was the main stated driver of the composite indicator’s decline. A negative balance means unfavorable answers outweighed favorable ones under the survey’s balance method; it is not a 41.5% fall in activity.

Other responses were less uniformly weak. The balance on past sales improved slightly to -13.1 from -14.2, while the balance on expected sales rose to -12 from -13. Both remained below their respective long-run averages. The balance on order intentions was broadly stable at -13.2, still below average for a seventh consecutive month. Those readings suggest that modest improvement in sales assessments did not offset weaker general expectations or remove the subdued view of future orders.

Firms’ assessment of current stock levels strengthened, with the stock balance rising to 15, above its long-run average of 10. The balance on expected selling prices increased to 13.2 from 9.5 and remained above its long-run average, which is zero. These are balances of survey opinions, not measurements of stock volumes or actual price inflation. Insee’s table also showed the balance for expected employment improving to -7.7 from -11.1, even as the past-employment balance worsened to -11.3.

The overall measure covers retail trade together with motor-vehicle trade and repair, so its movement is not identical to a retail-only indicator. In October the separate climate indicator stood at 92.5 for retail trade excluding motor vehicles and 94.9 for motor-vehicle trade and repair. The release describes a further decline in the retail-only climate reading, while the motor-vehicle indicator was broadly steadier. A combined headline therefore reflects both parts of the surveyed business population.

Insee conducts a monthly business survey and compares balances with their long-run means. The balance is calculated from the distribution of favorable, unchanged and unfavorable responses, rather than from transaction data. The October fall in general prospects was close to the level last reached in May, but the agency’s comparison excludes the pandemic period when describing the earlier historical low. That qualification matters when placing the result in a longer time series.

The component pattern helps explain the headline. General activity prospects fell to -41.5, close to the May reading that Insee said had not been observed since October 2014 outside the pandemic period. By comparison, past and expected sales balances were -13.1 and -12, while order intentions stood at -13.2. The gap shows that respondents were especially downbeat about the wider activity outlook, even as sales assessments edged up from September.