Bloomberg News

French Business Sentiment Halts Slump on Recovery Signs: Economy

February 21, 2012

(For more on Europe’s debt crisis, see EXT4.)

Feb. 20 (Bloomberg) -- French business confidence arrested a seven-month decline in February, the latest sign that Europe’s second-largest economy may be starting to recover after unexpectedly expanding in the fourth quarter.

Sentiment among factory executives held at 92 after January’s reading was revised from an initially reported 91, Paris-based statistics office Insee said today. The reading matched the median forecast of 18 economists surveyed by Bloomberg News. A gauge of the outlook among businesses rose to a six-month high.

Business confidence in Germany, Europe’s largest economy, probably also rose in February, economists said before a report on Feb. 23. Finance ministers meet in Brussels today to conclude talks on a second Greek bailout as they seek to end a debt crisis that began more than two years ago and has undermined sentiment and growth across the region.

The indicator “suggests further stabilization in the business climate with upside surprises possible,” said Fabrice Montagne, an economist at Barclays Capital in London. “Looking ahead, however, we are still worried about a below long-term average reading in the first quarter and see room for the economy to contract slightly.”

The February confidence reading of 92 is the lowest in almost two years. Still, the order books gauge rose to minus 26 from minus 28 and the production outlook increased to minus 27 from minus 36.

Cautious Start

After predicting in December that the French economy would shrink in the fourth quarter of 2011 and the first quarter of 2012, Insee said last week that the economy grew 0.2 percent in the three months through December, helped by external trade and business investment.

“The word for the start of the year is ‘caution,’” Air Liquide SA Chief Executive Officer Benoit Potier said on Feb. 17. In November and December, the big companies “closed their taps. Now they’re starting to come back” and we’re seeing a “return to normality.”

The Ifo institute’s business climate index for Germany climbed to 108.8 from 108.3 in January, according to the median of 37 forecasts in a Bloomberg survey. The European Central Bank is set to allot a second tranche of three-year loans this month after a previous measure in December helped ease liquidity strains in the financial system.

Italy’s industrial orders rose 5.5 percent in December from November, the country’s statistics institute said today. From a year earlier, orders were down 4.3 percent.

Japan Deficit

In Asia today, Japan posted a record trade deficit in January as the yen’s strength and weaker global demand eroded manufacturers’ profits and slowed the nation’s recovery from last year’s earthquake and tsunami. The gap widened to 1.48 trillion yen ($19 billion) as shipments dropped 9.3 percent from a year earlier and energy imports surged, the Ministry of Finance reported in Tokyo.

Shipments to China, Japan’s largest market, fell 20 percent from a year earlier, the biggest decline since Aug. 2009. Exports to the European Union slid 7.7 percent and shipments to the U.S. advanced 0.6 percent.

Thailand Shrinks

Elsewhere in Asia, Thailand’s economy shrank 9 percent in the fourth quarter compared with the year earlier on the worst floods in almost 70 years. In New Zealand, producer input prices gained 0.5 percent in the same period from the three months through September, the smallest increase since the fourth quarter of 2009, Statistics New Zealand said in Wellington.

Asian stocks advanced after China cut banks’ reserve requirements to fuel lending and buoy economic growth, boosting demand for riskier assets. The MSCI Asia Pacific Index rose 0.8 percent as of 10:26 a.m. in London. The Stoxx 600 Europe Index gained 0.7 percent. U.S. markets are closed for the Presidents’ Day holiday.

In Europe, finance ministers will try to settle remaining disputes at a meeting today as they close in on a 130 billion- euro ($172 billion) bailout for Greece, which the country needs to make a bond payment on March 20.

The euro rose against the dollar for a third day on speculation of an accord. Greek Finance Minister Evangelos Venizelos said his country has delivered on everything needed to be able to get approval for the package. The euro gained 0.6 percent to $1.3218.

“We expect today to close a long period of uncertainty that has not been to the benefit of either the Greek economy or the euro area as a whole,” Venizelos said.

French Finance Minister Francois Baroin said that euro-area countries should be able to reach a deal.

“We have all the elements for an agreement,” Baroin said today on Europe 1 radio. “There are many structural reforms under way. We can’t wait because of the payment that is due in March.”

--With assistance from Barbara Sladkowska in Warsaw. Editors: Craig Stirling, Simone Meier

To contact the reporters on this story: Mark Deen in Paris at markdeen@bloomberg.net; Fergal O’Brien in London at fobrien@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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