French Business Confidence Rises to Highest in 15 Months

French business confidence rose to the highest in 15 months in July, indicating that improving demand is helping to support an economy that’s stagnated for the past two years.

Sentiment among industrial executives increased to 95 in from 93 in June, national statistics office Insee in Paris said today. That’s above the reading of 94 that was the median forecast of 21 economists in a Bloomberg News survey. A broader index including the services, wholesale and construction industries climbed to 87 from 86.

The improvement suggests the euro area’s second-largest economy may be starting to stabilize after it slipped back into a recession this year. With the indexes below their long-term average, the recovery that President Francois Hollande trumpeted in his Bastille Day address last week remains elusive.

“The good news is that the recession isn’t getting deeper, but before talking about a rebound we need to see the tandem of investment and employment improving,” said Michel Martinez, an economist at Societe Generale SA in Paris. “We’re not there yet.”

Insee and the Bank of France both estimate that gross domestic product rose 0.2 percent in the three months through June after falling in the two previous periods. Insee will publish its first estimate of second-quarter gross domestic product on Aug. 14.

Traction Needed

Hollande said July 14 that “the economic recovery is there,” pointing to improving industrial-production figures in a bid to bolster confidence. Finance Minister Pierre Moscovici repeated that assertion today.

“We’re out of the recession,” Moscovici said on Europe 1 radio. “Now what needs to be done is that the recovery needs to gain traction.”

The production outlook indicator climbed to minus 30 in July from minus 41 in June, according to today’s report from the statistics office.

The reading is “consistent with a modest increase in industrial activity early in the third quarter,” Annalisa Piazza, an analyst at Newedge Group in London, said in a note. “That said, the indicator remains below the long-term average of minus 21, a sign that it will take a while for French activity to reach its potential.”

Economic Forecasts

Economists in a monthly Bloomberg survey published on July 11 estimate that French GDP fell 0.1 percent in the second quarter and will rise 0.1 percent this quarter. Both the International Monetary Fund and the European Commission forecast that the economy will shrink this year.

Paris-based L’Oreal SA, the world’s largest cosmetics maker, reported second-quarter sales growth this month that missed analysts’ estimates. It said the European market is “declining slightly, with a negative southern Europe, and the rest of Europe remaining more or less stable.”

A euro-area consumer confidence index due at 4 p.m. Brussels time probably rose to minus 18.3 in July from minus 18.8 in June, according to the median forecast of 27 economists in a Bloomberg survey.

Surveys tomorrow may show that French manufacturing and services shrank at a slower pace in July. A factory index from Markit Economics Ltd. rose to 48.8 from 48.4 in June, according to the median of 18 estimates in a survey. A services gauge increased to 47.5 from 47.2, a separate poll showed.

Measures for the euro area also probably improved this month, while remaining below the 50 mark that divides expansion from contraction. European Central Bank President Mario Draghi forecasts a “gradual recovery” in the 17-nation region by the end of the year.

Separately today, the Bank of Spain said GDP probably fell 0.1 percent in the second quarter from the previous three months, when it dropped 0.5 percent. That’s the eight quarterly contraction. Today’s number exceeds the median estimate of a 0.3 percent decline forecast in a Bloomberg News monthly survey of economists.

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