France Business Climate Improves Again in August

France’s business climate improved for a third consecutive month in August, extending a recovery from the spring slowdown without yet returning to its long-term norm. The headline indicator rose one point to 98, according to INSEE, while the employment-climate indicator was unchanged at 99 on a rounded basis.

The improvement was spread across several major sectors. Manufacturing strengthened further and remained above its long-term average, services reached their average level, and the combined retail and motor-vehicle trade indicator moved closer to normal. Construction was the main laggard, with its climate indicator still below average even as some underlying measures improved.

In its August business-climate release, INSEE said the national indicator is built from 28 balances of opinion drawn from surveys of managers in manufacturing, services, trade and building construction. Responses for the August survey round were collected between July 27 and August 18, with most companies replying during the first two weeks.

Three-month rebound brings the headline indicator closer to normal

The unrounded national business-climate index rose to 98.1 in August from 97.3 in July and 95.0 in June. It stood at 93.9 in May, so the indicator has gained 4.2 points in three months. August was also the strongest reading since February, when the index was 98.6, although it still remained below the long-term benchmark of 100.

That sequence matters because the first part of 2026 had moved in the opposite direction. The indicator was 99.2 in January, eased to 98.6 in February and 97.5 in March, then dropped to 94.1 in April and 93.9 in May. The latest figures therefore recover much of the spring decline, but they do not show business conditions running above normal across the economy.

The sentiment improvement comes after a modest rebound in measured economic activity. INSEE’s first estimate for the second quarter showed French GDP rising 0.2% after a 0.1% decline in the first quarter. Household consumption increased 0.2%, while gross fixed capital formation fell 0.3%. The business-climate survey is not a GDP measure or a forecast of quarterly output, but the newer responses provide a more current view of how managers assessed activity, demand and staffing as the third quarter progressed.

Manufacturing and retail provide most of the lift

Manufacturing posted the clearest sectoral strength in August. Its composite climate indicator rose to 103.2 from 101.1 in July, placing it above the long-term average of 100. INSEE said the main driver was a rebound in managers’ own production expectations. The balance for personal production prospects rose to 9 from minus 1 in July, while the balance on foreign order books improved to minus 8 from minus 12. Reported economic uncertainty also declined for a fourth consecutive month.

Retail trade and the trade and repair of motor vehicles recorded a three-point increase on the rounded measure, bringing the combined indicator to 99.4 before rounding. The improvement reflected stronger ordering intentions and past sales, but the detail was uneven. Retail trade excluding motor vehicles rose to 103.2, above its long-term average, while the motor-vehicle trade and repair indicator slipped to 93.4. That split shows why the broad retail reading is better viewed as a recovery with continuing weakness in autos rather than a uniform improvement in consumer-facing activity.

Services also moved in a better direction, with the composite indicator rising to 99.8 from 99.0 and reaching its long-term average after rounding. INSEE reported higher balances for past and expected activity and for expected demand. Beneath the headline, administrative and support services improved sharply to an index reading of 100 from 93, and accommodation and food services moved to 102. Professional, scientific and technical activities weakened to 97 from 101, while road freight transport slipped to 98 from 100, leaving the service-sector recovery mixed across industries.

Construction remains below average as employment gauge holds near normal

Building construction remained the weakest of the large sectors covered in the national summary. Its unrounded climate indicator edged to 96.2 from 95.7, which INSEE described as stable at 96 after rounding and still below the long-term average. The internal survey details were somewhat firmer: the balance on order books improved to minus 26 from minus 30 and reached its highest level in two years, while the balance for expected activity rose to minus 7 from minus 9. Past activity was unchanged.

The employment-climate indicator was 99.3 in August compared with 98.6 in July. Because both readings round to 99, INSEE characterized the measure as stable. The employment gauge has nevertheless recovered from 94.6 in May. It is constructed from 10 balances covering past and expected employment in manufacturing, services, retail trade and construction, so it should be read as a survey-based measure of hiring conditions rather than as an unemployment rate or payroll count.

Late survey responses also changed some of the July sector readings. INSEE revised the July services climate and employment climate upward by one point after rounding, revised building construction down by one point and cut the retail-trade climate by three points. The institute said those changes reflected the inclusion of late company responses, while the other climate indicators were unchanged after rounding.

INSEE is scheduled to publish the September business-climate report on September 24 at 8:45 a.m. The August response window closed on August 18, so the next release will incorporate a later slice of third-quarter business conditions.