Industry morale best since 2008

Sentiment in French industry reached its highest level since March 2008 in December, the Bank of France said yesterday, but it also slightly trimmed its forecast for fourth-quarter growth.

The central bank's business sentiment indicator rose to 101 from an unrevised 99 in November. It was also the first time it had topped 100 since April 2008.

"The data shows the recovery will last for a few months, but we must not lie to ourselves about the fact that a big part of the improvement is linked to cars and stocks and behind that it's still quite fragile," said Olivier Gasnier, economist at Societe Generale.

The central bank said it now expects gross domestic product (GDP) to expand by 0.5 per cent from October to December, down from a previous estimate of 0.6 per cent growth.

"Industrial activity appeared to be stable overall in December, with the rise in agri-food and consumer goods industries offsetting the slight fall in the other large sectors," the Bank of France said in the report.

The report showed that activity in the services sector also improved with the sentiment indicator edging up to 88 from an upwardly revised 86 in November. "Services continued to firm, mainly due to the ongoing recovery in temporary work; growth also picked up in the engineering and advertising sectors," the report said.

The French economy grew by 0.3 per cent in both the second and third quarters of 2009 and most forecasters agree with the Bank of France that the final three months of the year will do better than that.

But a number of economists are increasingly concerned that the nascent recovery may run out of steam as rising unemployment and fears of government fiscal tightening discourage consumers from spending.

Separate data released yesterday showed the economic crisis hurt government finances again in November, as plummeting tax receipts helped to push the budget deficit to €143.3 billion (Dh763.14bn) from €66.6bn a year earlier.

Government spending also rose as the state pumped money into the economy to help it overcome the financial crisis.

However, the budget ministry said it expected the deficit for 2009 as a whole to reach €140bn, a slight improvement from its earlier forecast of €141bn, as December tax receipts were likely to be better than expected.

Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.

Follow Emirates 24|7 on Google News.