French Confidence Steady as Production Outlook Drops
French business confidence unexpectedly held steady in January, a sign that executives in Europe's third-largest economy anticipate avoiding the worst of the fallout from a U.S. slowdown.
Insee, the Paris-based national statistics office, said today its index of sentiment was 109, the same as December. Last month's reading was revised down from 110. Economists predicted a one- point drop to 109, according to the median of 24 forecasts in a Bloomberg News survey.
“It's a slight decline, but at a relatively high level,'' said Alexandre Bourgeois, an economist at Paris-based Natixis. “You can't talk about recession or breakdown.''
President Nicolas Sarkozy's tax cuts and growth in Asian economies may sustain the French economy even as a stronger euro and higher energy costs curb competitiveness. Publicis Groupe SA, a Paris-based advertising agency, had a “very good'' fourth quarter for new business, Chief Executive Officer Maurice Levy said today.
French economic growth is set to trail the euro region for a third year in 2008, the Organization for Economic Cooperation and Development estimates. After a “weak'' first-half this year, the economy will expand 1.8 percent as fallout from a U.S. housing recession curbs the global expansion.
Production Outlook
A gauge of executives' outlook for production dropped to minus 4 from 4, the lowest since February 2006, Insee reported today paydayloans. Nevertheless, an index of their forecasts for their own business climbed to 19 from 12.
“We have a hard time seeing how business leaders' confidence can hold up much longer while international economic growth slows rapidly and stock markets remain volatile,'' said Mathieu Kaiser, an economist in Paris at BNP Paribas SA. “Still, the solid business climate suggests the French economy is standing up better than the euro area.''
The French report followed an unexpected increase in German business confidence from a two-year low, according to the Ifo institute yesterday. European Central Bank council member Axel Weber yesterday expressed confidence in economic growth and Siemens AG, Europe's biggest engineering company, reported a first-quarter profit that beat analysts' estimates.
Sarkozy has sought to spur the economy by eliminating payroll charges on overtime hours and has enacted tax cuts and proposed measures to boost incomes. At the same time, he has won contracts worth more than $40 billion for nuclear-power plants, airplanes and trains following visits to Asia and North Africa.
France's business confidence index has oscillated between 106 and 111 this year, far from the record 123 reached in 2000.