In the month of May 2023, the business climate in France’s services sector witnessed a concerning decline for the third consecutive month, according to a monthly survey conducted among business managers. The indicator that synthesizes the overall business climate dropped by two points to 101, although it managed to remain slightly above its long-term average of 100. The survey revealed a widespread decrease in opinion balances across various aspects, particularly in the general and personal business outlook.
The survey, published by INSEE (National Institute of Statistics and Economic Studies) on May 25, 2023, gathered responses from business managers operating in the services sector. It highlighted the challenging conditions faced by service-oriented businesses in the current economic landscape.
The business managers expressed a less optimistic outlook for their activity prospects compared to the previous month. The balance of opinion on expected activity has decreased for the third consecutive month, moving away from its long-term average. Similarly, the balance related to the general business outlook for the sector also declined, although it still remains above its own average. The balance on expected demand experienced a slight rebound but remained below its average, while the balance on economic uncertainty felt remained stable.
In terms of pricing, the balance of opinion on the recent change in selling prices decreased slightly, while the one concerning the expected change in selling prices declined more sharply. However, both balances remained well above their long-term averages.
The employment outlook also showed signs of deterioration. The balance of opinion on the change in workforce size over the past three months dropped significantly, falling below its average. The balance on the expected workforce size decreased once again, but it still remained above its own average.
The decline in the business climate was observed across all sub-sectors of the services industry, except for information-communication. In accommodation and food services, the business climate indicator decreased noticeably but remained above its average level. The balances of opinion on past and expected activity, as well as expected demand, experienced significant declines.
Road freight transport experienced a sharp decrease in the business climate, well below its long-term average. The balances of opinion on expected demand and the general and personal business outlook exhibited substantial declines, falling well below their respective averages.
Real estate activities also saw a significant deterioration in the business climate, moving below its average. The balance on expected activity declined significantly and moved further away from its own average.
Professional, scientific, and technical activities, along with administrative and support services, witnessed a decline in the business climate but managed to stay above their respective averages. The balances of opinion on the general and personal business outlook decreased in both sectors.
In contrast, the information-communication sector experienced an improvement in the business climate, moving away from its average. The balances of opinion on expected activity and demand rebounded sharply.
The deteriorating business climate in the services sector raises concerns about the overall economic recovery in France. As businesses face persistent challenges, policymakers and industry leaders may need to implement strategies to support and stimulate growth in the services industry.