French morale weak in September as inflation weighs on outlook

Fresh figures on business and household confidence in France were released on Tuesday.

• Consumer confidence came in at 86 in September, matching the prior reading and beating the 85 forecast.
• Business confidence fell to 96, below the 97 expected and down from 98 previously.

Consumer sentiment in France remained unchanged in September, though it continues to sit far below the historical norm of 100. The data showed a modest improvement in households' outlook on their future standard of living, with that gauge rising two points to -60. Still, it remains well under the long-term average of -29. Prospects for unemployment also improved slightly, as the corresponding indicator dropped three points to 55.

However, these gains were balanced by a decline in both current and expected saving capacity among consumers, as price perceptions continue to edge upward. Rising inflation pressures and higher oil costs have not helped the situation, with the future inflation balance jumping to -9, its highest level since May.

Meanwhile, the French business climate worsened in September and also remains below its long-term average of 100.

The decline reflected a mild downturn in services sector sentiment, with that balance slipping from 99 to 98 in September. Employment conditions also softened slightly, moving from 99 to 98 month-on-month, adding to the more negative mood.

Overall, the data underline that both household and business sentiment remain lackluster at best across the French economy.

On a positive note, this has not significantly damaged business activity data at the close of the third quarter. However, ongoing inflation challenges remain and could bite into the economy more seriously in the coming quarter, especially if oil prices stay elevated and higher bond yields lead to tighter financial conditions.