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Business confidence goes down the Seine

FRENCH business confidence dropped to a record low in February with falling orders and manufacturers bracing themselves for the possibility of falling prices in the months ahead.

French national statistics office INSEE said yesterday that its monthly business confidence index dropped to 68 in February from a previous record low of 73 in January. Analysts polled by Reuters expected a reading of 73.

Last month's survey, while at a record low, had at least steadied at the level of the end of 2008, holding out a slight hope the downturn may have reached some kind of floor but any faint optimism was dashed by Friday's data.

"After January's glimmer of hope with the stabilization of the business climate, it is a really bad surprise," said Marc Touati, an economist with Global Equities in Paris.

Also yesterday an influential purchasing managers' index showed a sharp slowdown in business activity in February, pointing to a rapid deterioration in the economy and mounting unemployment in the coming months.

"All of this adds up to a very gloomy picture," said Societe Generale economist Olivier Gasnier.

The economy contracted 1.2 percent in the fourth quarter of 2008 and Economy Minister Christine Lagarde said that she expects the economy to shrink 1 percent in 2009.

President Nicolas Sarkozy has pledged a 26-billion-euro (US$32.70 billion) stimulus package to boost investment and risked conflict with partners in Europe by demanding that companies keep investment at home. But the continued bad economic news is likely to increase pressure on him to do more.


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