French business confidence fell in February on concern that growth may slow as President Nicolas Sarkozy's government phases out economic stimulus measures.
The Bank of France's Business Sentiment Indicator for manufacturing dropped to 102 from 104 last month, the central bank said today in a statement. Economists had expected the indicator to be unchanged, according to a Bloomberg News survey.
Service industry sentiment rose to 90 from 89 in January. The decline snaps 13 straight months of gains fueled by stimulus measures aimed at fighting France's deepest recession since the second World War.
Mr Sarkozy is cutting the programme to about €4.1 billion this year from 15.1 billion in 2009, causing consumer spending to sputter early this year. "Confidence has improved a lot, so it's normal that we're experiencing a correction now," said Dominique Barbet, an economist at BNP Paribas in Paris. "This may be the dip in the wave, with the economy picking up again in the second quarter."
France's economy will expand at a slower pace in the first quarter than previously estimated, growing 0.4 per cent compared with an initial prediction of 0.5 per cent, the central bank said in today's statement. The car industry is among the hardest hit by the withdrawal of the stimulus programme.
The government offered €1,000 for every 10-year-old car traded in for a new one last year, with the subsidy dropping to €700 in January. As a result, motorists brought forward purchases, driving a 0.6 per cent expansion of the economy in the fourth quarter. Now demand is waning, with spending on manufactured goods dropping 2.7 per cent in January.
Bloomberg