French Business Confidence Drops as Crisis Stokes Recession Risk

French business confidence fell for a sixth month in December as Europe’s debt crisis discouraged investment and threatened to tip the economy into recession.

A gauge of sentiment among factory managers fell to 94 from a revised 96 in November, national statistics office Insee said today in Paris. Economists forecast a reading of 93, according to the median of nine estimates in a Bloomberg News survey.

With Europe’s debt crisis showing little sign of abating and Standard & Poor’s considering whether to strip France of its AAA credit rating, companies are cutting back on investment. The French economy, the euro area’s second largest, is probably already in a recession that will last through March, Insee said yesterday in a quarterly forecast.

“The economic turmoil is hitting industrial investment,” said Pierre-Olivier Beffy, chief economist at Exane BNP Paribas. The slide in confidence “is much steeper than that still officially anticipated by the government.”

The French economy will shrink 0.2 percent in the fourth quarter and 0.1 percent in the first quarter, before expanding 0.1 percent in the second quarter of 2012, Insee said yesterday.

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