French Sentiment Rises as Sarkozy Lifts Growth Forecast: Economy
French business confidence jumped more than economists forecast this month, the latest sign of an economic rebound that allowed President Nicolas Sarkozy to lift his growth forecast in the midst of an election fight.
Sentiment among factory executives rose to 96 from 93 in February, Insee, the national statistics office in Paris, said today. Economists forecast an increase to 93 from a previously reported February reading of 92, according to the median of 19 estimates in a Bloomberg survey. It’s the first time the gauge has increased for two consecutive months in more than a year.
The improvement signals a recovery that Sarkozy is trumpeting at the end of a five-year term dominated by a financial crisis that drove French joblessness to a 12-year high. The Finance Ministry lifted its 2012 growth forecast to 0.7 percent late yesterday from 0.5 percent in January following months of turmoil in European sovereign debt markets.
“The confidence rebound is really quite strong,” said Michel Martinez, an economist at Societe Generale SA in Paris. “Executives are signaling that the economy touched bottom in the fourth quarter and is now returning to normal.”
Elsewhere today, Federal Reserve Bank of St. Louis President James Bullard told a conference in Hong Kong that U.S. monetary policy may be at a turning point and the Fed’s first interest-rate increase since the global financial crisis could come as soon as late 2013.
U.S. data today will give the latest reading on the property market in the world’s largest economy, with new home sales likely to have climbed in February to the highest level in more than a year, a Bloomberg survey shows. Italy reported that retail sales unexpectedly rose 0.7 percent in January from the previous month.
In Europe, stocks declined today, with the Stoxx Europe 600 Index (SXXP) slipping 0.3 percent as of 10:51 a.m. in London. The benchmark gauge has advanced 8.5 percent so far in 2012 as the European Central Bank added more than 1 trillion euros ($1.3 trillion) of liquidity to bolster the region’s banks and euro- area leaders agreed a new bailout for Greece.
The central bank funds also helped calm the region’s debt markets and restored growth prospects. Insee said late yesterday that it was dropping its forecast for a recession in France in the six months through March and predicting that the euro area’s second-largest economy would return to growth in the second quarter after stalling in the first.
“The ECB has intervened massively,” Insee economist Sandrine Duchene told reporters. “We’re starting to see the results in the European economy surveys. The intensity of the shock is fading.”
Sarkozy had pressed the ECB for much of last year to take a bigger role in the crisis-fighting effort, an idea opposed by Germany. After months of wrangling, Sarkozy and German Chancellor Angela Merkel agreed on Nov. 24 to stop debating the central bank’s fire-fighting role.
Two weeks later, the ECB said it would offer unlimited cash to banks at 1 percent for three years and ease its collateral rules. On Dec. 9, Sarkozy advocated that banks use some of those funds to buy sovereign bonds, prompting some investors to call such transactions the “Sarko trade.”
Now Sarkozy is vaunting his credentials as a crisis fighter as the French election enters its final six-week stretch. Still, the results may not spur enough job creation in time to get noticed by voters, Societe Generale’s Martinez said.
“The growth will be there but it will be moderate,” he said. “It won’t be enough to dent unemployment.”
Insee predicts that companies will cut 49,000 jobs in the first half after slashing 54,000 in the six months through December. The unemployment rate will climb to 10.1 percent in June from 9.8 percent in December, the statistics office said in a set of forecasts that it publishes three times a year.
Socialist Francois Hollande has enough support to beat President Nicolas Sarkozy in both rounds of the French presidential election, according to a BVA poll published in Ouest France and Le Parisien newspapers today. The poll showed Hollande with 29.5 percent in the first round and Sarkozy garnering 28 percent. In second-round voting, Hollande has 54 percent support to Sarkozy’s 46 percent.
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