Tuesday, May 27, 2008

France Business Confidence May 2008

French business confidence declined to the weakest in more than two years in May as rising energy prices and strong euro hurt the outlook for corporate sales and profits. An index of sentiment among 4,000 manufacturers slid to 102 from 106 in April, according to Insee, the Paris-based national statistics office. That was the lowest since December 2005.

Growth in the euro area's second-largest economy has been slowing recently as inflation hurts consumer spending at the same time as exporters feel the pinch of slowing orders from the U.S., a euro worth around $1.55 and record oil prices.

A sub-index of how executives see the economic outlook fell to minus 15 from minus 9, while a gauge of orders dropped to minus 11 from minus 4 and a measure of foreign orders declined to minus 7 from 3.

The 18 percent gain in the euro against the dollar over the past year will continue to put pressure on exports as rising inflation weighs on consumer demand in local markets. Consumer prices rose 3.4 percent in France this month from a year ago. Higher energy costs are pushing up inflation, with the price of oil reaching a record $135.09 a barrel on May 22.

The French government expects growth of between 1.7 percent and 2 percent this year, compared with 1.9 percent last year.

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