French Business Confidence Rises for a Third Straight Month

By Helene Fouquet

June 23 (Bloomberg) -- French business confidence rose for a third month in June, suggesting demand for manufactured goods in the euro-region’s second-largest economy may be rebounding and the economic slump easing.

An index of sentiment among 4,000 manufacturers rose to 75, from a revised 73 in May, Paris-based statistics office Insee said today. That was more than the median forecast of 74 by 16 economists in a Bloomberg News survey. The gauge fell in February to 68, the lowest since the data began in June 1962.

“We are still in the phase of recovery, rather than real positive growth,” said Joost Beaumont, an economist at Fortis Bank NV in Amsterdam. “But we are seeing these green shoots, including in Asia, in the U.S.” He expected French confidence to rise to 74.

President Nicolas Sarkozy has introduced about 30 billion euros ($41.6 billion) in tax cuts and spending that aim to pull the economy out of the deepest slump since World War II, inflating the deficit and debt to records. Finance Minister Christine Lagarde said she was cautious about signs that the recession was easing. Europe’s third-largest economy has contracted for four straight quarters, pushing the jobless rate to more than a two-year high.

The gain in business confidence contrasted with signs of slumping optimism among consumers. French household spending unexpectedly fell 0.2 percent in May and plunged 1.6 percent from a year earlier, a separate Insee report showed today.

Record Deficit

The government expects the economy to contract 3 percent this year before growing 0.5 percent in 2010 and the budget deficit may widen to between 7 percent and 7.5 percent of gross domestic product this year, a record and more than twice the European Union limit.

French manufacturers showed renewed optimism on overall production as the indicator surged to minus 40 from a revised minus 50, Insee said. They are less pessimistic about their own production outlook with that reading improving to minus 18 from a revised minus 28. Outlook on order books showed manufacturers expect them to remain low with that measure falling to minus 70 from minus 69 a month before.

The May business confidence reading was revised to 73 from the 72 initially reported, while the manufacturers’ own- production outlook was revised in May from minus 29.

To contact the reporter on this story: Helene Fouquet in Paris at Hfouquet1@bloomberg.net.