French Business Sentiment Drops for Third Month as Growth Fades

French business confidence fell for a third month as recessions in countries such as Italy and Spain combined with stalling growth at home to reduce demand.

Sentiment among factory executives declined to 92 in June from 93 in May, the Paris-based national statistics office Insee said today. Economists forecast a reading of 92, according to the median of 22 estimates gathered by Bloomberg News.

The drop is the latest sign that Europe’s second-largest economy is flagging in the face of renewed concern about a regional debt crisis now in its third year. Danone, the Paris-based company that is the world’s largest yogurt maker, today cut its profitability forecast citing a “steeper than anticipated” drop in demand in southern Europe.

“We expect the index to stabilize at this low level, confirming a weak second-quarter,” said Pierre-Olivier Beffy, chief economist at Exane BNP Paribas in London. “Orders remain subdued and confidence is affected by renewed tensions in the euro zone debt crisis.”

Group of 20 leaders meeting today in Los Cabos, Mexico are focusing their talks on response to Europe’s financial crisis as Spain’s borrowing costs soared to a euro-era record and elections in Greece failed to damp the threat of contagion.

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