French business morale improves
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PARIS, France (Reuters) -- French business confidence edged slightly higher in February but industry chiefs raised the alarm over a further weakening of their foreign order books, official data showed on Thursday.
National statistics body INSEE said its monthly index rose to 103 from 102 in January as business leaders declared they were satisfied with existing output levels.
INSEE said the index was now treading water at around its average historic level. The small extent of the gain suggested a "lower degree of dynamism'' in the industrial outlook, it said.
The figure was broadly in line with analysts' expectations and maintained confidence at its highest level since May 2001. They come after separate surveys this week showing a drop in business confidence in Germany and Italy.
But fears the euro's highs against the dollar could stunt a euro zone upturn were reflected as the index component measuring the state of foreign orders fell from minus nine to minus 16.
"The worrying element comes from orders, which were already at a low level at the end of 2003 and do not seem to be improving,'' said Emmanuel Ferry, an economist at Paris-based investment house Exane, citing the euro as the main factor.
Many fear the rise in the euro, which was trading at around $1.2490 in early Thursday trade, could hold back a fragile recovery in the euro zone by making its exports more expensive in foreign markets.
Alexandre Bourgeois at Natexis Banques Populaires said French growth this year could remain as low as one percent if the currency remained at its present level or rose, compared to a possible 1.7 percent if the euro dipped to around $1.15.
France lagging
The figures from the euro zone's second largest economy followed a survey from Rome on Wednesday that showed a drop in Italian business confidence as firms raised concerns, notably about a build-up in their warehouse stocks.
Earlier this week, a poll by the influential Ifo institute showed German business confidence fell in February for the first time in 10 months as the euro's rise to record levels against the dollar dampened expectations.
"The level of the index is still some way behind that of the Ifo survey,'' said Natexis' Bourgeois. "It confirms our view of a gradual and moderate upturn, certainly not of a fast one.''
The index component measuring individual firms' outlook for their own production ticked higher to 12 from 11, and their personal outlook on sale prices was also more positive rising from minus eight to minus two.
The strongest gain in the personal outlook index was among automobile consumer goods companies. The read-out for recent output levels put on most gains in the intermediate and consumer goods sectors.
Despite its forecasting-beating profits for 2003 announced this month, French electrical equipment maker Schneider sounded cautious in its outlook for France.
"France is lagging behind west Europe. So we are going to have to look for growth elsewhere,'' said Schneider chief Henri Lachman, explaining why the group was looking to expand into new markets.
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