French business confidence edges higher in October, though underlying weaknesses persist

• Business confidence in France for October stood at 97, compared to an expected reading of 96.
• The previous month's figure was 96.
• Industrial confidence reached 105 in October.
• That was up from 101 in September.
• Services confidence posted a reading of 99.
• That compares to a prior level of 98.

The business climate index edged higher in October, though it stayed below the long-term average of 100 for another month. The last time it reached that threshold was in June 2024.

Though manufacturing and services confidence improved, the report reveals weaknesses elsewhere. Retail confidence slipped 3 points to 93, the lowest reading since June. The employment index dropped to 95, its lowest since May. INSEE attributed the decline to a reduction in the balance of expected workforce size in services, excluding temporary work.

The headline gain does not suggest a strong recovery. Businesses are less inclined to add workers, which bodes poorly for household spending, particularly given fragile retail sentiment.

The fiscal environment adds to concerns. French 10-year yields briefly rose above 5% this week, and the spread over German bunds reached levels not seen in about 15 years.

While the slight uptick provides some relief, caution is warranted. France still faces significant economic and fiscal challenges, and this survey offers little evidence that the situation has turned a corner.