French business confidence exceeded economists’ forecasts

01-23-2010 11:43

French business confidence gained more in January than economists expected, following indications that the economic improvement accelerated after the most intense slump in sixty years.
The gauge of sentiment among plant managers climbed from an adjusted 88 to 92 last month , the French National Institute for Statistics and Economic Studies, INSEE, reported this Friday. The median of 18 estimations demonstrated that economists forecasted a reading of 90.

French economy

The French economy exited recession in 2009, expanding 0.3% in the second and third quarters. The Finance Ministry stated this week that the pace of growth gained in the last quarter of 2009 and increased the forecast for this year, forecasting that the French economy will grow by 1.4%.

Global trade

Joost Beaumont, an economist at Fortis Bank Nederland in Amsterdam, commented: “Recovering global trade provides support to the French industry. Foreign demand should primarily boost economic growth.”

Bonds - debt

The report pushed French bonds up, as the yield on the benchmark 10-year bond due in 2019 dropped 2 basis points, reaching 3.43%. One basis point represents 0.01 percentage point. The yield on French 10-year debt averaged 37.18 basis points more than 10-year German securities last year. Today’s spread valued 23.5 basis points.

INSEE

The French National Institute for Statistics and Economic Studies (INSEE) reported: “Manufactures notice a considerable business recovery. Stocks of end products are being considered as small, while orders, in general and overseas, are increasing, but the order level remains low.”
The level of foreign orders improved to -48 from -58 last month, according to INSEE.

Stocks

Although domestic demand may be limited by increasing joblessness, the Finance Ministry forecasts French companies to slash another 71.000 jobs in 2010, primarily in the first six months, while France lost 373.000 jobs last year.
Pierre-Olivier Beffy, chief economist at Exane BNP Paribas, stated: “The French economy is improving but we can’t determine its strength. US stocks are filling up and the outlook for Germany and France is optimistic.”