Surge in French business confidence

28th October 2004, Comments 0 comments

PARIS, Oct 28 (AFP) - Morale within the French business community showed a surprise increase in October despite high oil prices, though some analysts were cautious regarding the outlook for economic growth.

PARIS, Oct 28 (AFP) - Morale within the French business community showed a surprise increase in October despite high oil prices, though some analysts were cautious regarding the outlook for economic growth.

A monthly survey of business confidence by the national statistics institute INSEE rose to an indexed 108 from 106 in September, reaching its highest level since April 2001 and exceeding economists' forecasts of 105.

The main factor in the rise was general production perspectives, which shot up to an indexed 25 in October from 13 the previous month, INSEE said in a statement.

"Today's (general) figure is very surprising, given the recent French global environment and the sharp rise in oil prices," noted CDC Ixis economist Laure Maillard.

The result was also underpinned by a rise in the past production indicator - broadly expected, given a recent rebound in the car sector - as well as the foreign order books indicator, which rose for the third consecutive month.

"In spite of this figure, we are not very optimistic about French growth prospects in the coming months," Maillard warned.

She forecast that third-quarter French growth would slow down before picking up again slightly in the fourth quarter, leading to growth in 2005 of 1.9 percent.

BNP Paribas analyst Jean-Marc Lucas noted the business confidence indicator now stands at its highest level since April 2001 "despite uncertainties currently hanging over the economic environment," including high oil prices and euro-dollar currency fluctuations.

Even though economic growth in France - as in the rest of the euro zone - is likely to slow down in the second half of the year, "the latest business surveys suggest a continued recovery," he said.

© AFP

Subject: French News

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