French industrial confidence held near its lowest in more than two years in September as the economy stagnates and tax increases loom.
A measure of sentiment among factory executives was unchanged at 90, national statistics office Insee said in Paris today. Economists expected a reading of 89, according to the median of 18 forecasts in a Bloomberg News survey of economists. A gauge that includes retailers, builders and service industries fell to a three-year low of 86 from 87 in August.
Business confidence is faltering in Europe’s second-largest economy after gross domestic product failed to grow for three straight quarters and as President Francois Hollande prepares 20 billion euros ($26 billion) in tax increases for the coming year. Business sentiment in Germany unexpectedly fell to a two- and-a-half-year low this month, a report showed yesterday, as the sovereign debt crisis drives the euro area toward recession.
“We cannot expect a quick recovery any time soon,” said Joost Beaumont, an economist at ABN Amro in Amsterdam who expects the French economy to contract in the third quarter and flat-line through the first half of next year. “The budget is likely to be unfriendly to business. Consolidation is necessary but you would have expected the government to lean more on spending.”
Hollande’s government presents its 2013 budget on Sept. 28.
Insee’s reading for past production dropped to minus 18 from minus 9 in August, while the production outlook fell to minus 52 from minus 44. The general outlook “is deteriorating strongly again, approaching the very low levels reached in 2009,” Insee said.
The euro fell 0.2 percent to $1.2904 at 11 a.m. in Paris. The Stoxx Europe 600 Index (SXXP) of shares added 0.1 percent after falling 0.4 percent yesterday.
In neighboring Germany, Europe’s largest economy, market- research company GfK SE (GFK) predicted its gauge of consumer confidence will hold steady in October as a less pessimistic economic outlook offsets falling income expectations. The index will remain at 5.9 for a second straight month, GfK said.
“The fear of German consumers that the economy will slip into recession did not increase further,” GfK said in a statement. “But uncertainty of consumers with regard to their future financial prospects has risen in recent weeks.”
Italian consumer confidence remained near its lowest level in more than 15 years in September as the country’s deepening recession damped optimism. The confidence index inched to 86.2 from a revised 86.1 in August, the national statistics office, Istat, said in Rome today.
The 17-nation euro economy is on the brink of recession after contracting 0.2 percent in the second quarter. Bond and equity markets have rallied since the European Central Bank announced a plan to buy government bonds, joining the Federal Reserve, the Bank of England and the Bank of Japan in expanding monetary stimulus.
In Asia, South Korean consumer confidence held at a seven- month low in September.
In the U.S., the Conference Board publishes consumer confidence reading for September later today. Sentiment will probably climb to 63.2 from 60.6, according to the median of 72 estimates gathered by Bloomberg News.
Still, U.S. consumer spending probably stagnated in August after adjusting for inflation, showing the economic expansion is struggling to gain momentum, economists said before a report later this week.
Household purchases, which account for about 70 percent of the economy, rose 0.5 percent last month after a 0.4 percent increase in July, according to the median estimate of 63 economists surveyed by Bloomberg ahead of Sept. 28 figures from the Commerce Department. The report may show the gain reflected a 0.5 percent jump in prices, the biggest since June 2009.
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