French February Business Confidence Falls to Record Low

By Sandrine Rastello

Feb. 20 (Bloomberg) -- French manufacturers’ confidence fell to a record low in February as companies braced for a recession after the economy shrank by the most in at least three decades.

An index of sentiment among 4,000 manufacturers slipped to 68, the lowest level since the index started in 1976, from 73 in January, according to Insee, the national statistics office. The reading was lower than the median forecast of 73 in a survey of 23 economists by Bloomberg News.

“We’re probably at the bottom of the real economy’s crisis,” said Laurence Boone, chief French economist at Barclays Capital in Paris. “We’re not back to growth, but things are stabilizing.”

Gross domestic product fell 1.2 percent in the final three months of last year, when industrial production tumbled 8.6 percent, dragged down by the slumping car industry. President Nicolas Sarkozy’s government has announced aid programs that aim to stem job losses, give consumers more money to spend and spur sales at manufacturers such as Renault SA and PSA Peugeot Citroen.

L’Oreal SA Chief Executive Officer Jean-Paul Agon said on Feb. 17 that the cosmetics maker’s workforce in western Europe is shrinking. He announced a freeze on hiring after profit grew at the slowest pace in a decade.

‘Difficult’ Environment

“The economic environment in 2008 was difficult,” L’Oreal spokesman Thierry Prevot said on a Feb. 16 conference call. “It will certainly be even more difficult in the first half of 2009.”

Automakers Renault and PSA Peugeot Citroen are both cutting jobs to confront the drop in demand. European car sales plunged 27 percent in January to the lowest level in at least two decades.

The International Monetary Fund on Jan. 28 lowered its global growth estimate for this year to 0.5 percent from 2.2 percent. That would be the weakest expansion since World War II. The euro-region economy contracted the most in the fourth quarter since records began in 1995 as the financial crisis sapped export demand and companies cut investment.

Several European Central Bank policy makers including President Jean-Claude Trichet have said the central bank may cut rates to a record low from the current 2 percent and consider other measures to stimulate growth.

To contact the reporter on this story: Sandrine Rastello in Paris at srastello@bloomberg.net.