France has experienced a deterioration of manufacturing confidence (to the weakest level since March 2015) as well as of the total turnover of companies that went insolvent. The weakening of business confidence since a year ago was first driven by lower order books; then inventories increased during spring (particularly in the car value chain). Yet, manufacturing output avoided a recession in Q2 2019 thanks to strong export growth driven by aeronautics (+EUR6.8bn y/y YTD) and chemicals (+EUR3.3 bn). As this effect has vanished, manufacturing output is likely to have contracted in Q3. The latest confidence survey suggested that the decline gathered pace in October. At the same time, the total turnover of failed companies rose to EUR20.9bn in September (+EUR1bn m/m as well as y/y) with 147 additional insolvencies of firms with a turnover above EUR1mn (severity aspect). Notably in the car sector, 22% of the corporates now signal cash shortages (that ratio was higher only in 2009 and 2013) according to Insee. We expect further insolvencies in the months to come.
