French Business Confidence Drops, Suggesting Shrinking Economy

French business confidence fell last month, suggesting Europe’s second-largest economy shrank in the third quarter for the first time in more than two years, the Bank of France said.

Sentiment among manufacturing executives fell to 92 from 93 in August, the Bank of France said today. The reading suggests that France’s gross domestic product probably shrank in the three months through September, the Bank of France said.

The pessimism among executives is the latest sign that France is teetering on the verge of recession as Europe’s debt crisis nears its third anniversary and President Francois Hollande is preparing 20 billion euros ($26 billion) in tax increases in an attempt to reduce the budget deficit.

“French companies remain in a cautious mood,” said Pierre-Olivier Beffy, chief economist at Exane BNP Paribas in London. “

The French economy last shrank in the first quarter of 2009.

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net

To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net; Vidya Root at vroot@bloomberg.net

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