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Thursday, July 24, 2008

French Business Confidence Falls In July

French business confidence fell to the lowest in more than three years in July as record oil prices and a stronger euro dimmed the outlook for economic growth. An index of sentiment among 4,000 manufacturers dropped to 98 from 101 in June, according to Insee, the Paris-based national statistics office. That was the weakest since May 2005.

Insee's sub-index of how executives see the outlook fell to minus 34 from minus 15; a gauge of orders dropped to minus 18 from minus 13; and a measure of foreign orders slipped to minus 14 from minus 7.

Adding to signs of a slowdown, France's manufacturing and services industries shrank in July according to the latest flash reading on the Royal Bank of Scotland composite PMI for France dropped to 47, its lowest level in over 6 years. The flash estimate for France's service sector fell to 47.0 in July from 50.1 in June, according to data prepared for the RBS and released Thursday by Markit Economics.

That's the lowest reading on record and significantly below the consensus expectations of economists who had forecast a reading of 49.6. The PMI reading for the manufacturing sector was also lower than expected, falling to 47.3 in July from 49.2 in June. That's the lowest reading for five years

Europe's largest economies have been showing signs of slowing since the end of the first quarter. Business confidence fell to the lowest level in almost three years in Germany, according to the Munich-based Ifo Institute today. In Italy, business confidence slipped to its weakest since October 2001, according to the Isae Institute index.

The eurozone PMI index for the manufacturing sector fell from 49.2 points in June to 47.5 in July while its services counterpart dropped from 49.1 to 48.3. With both indicators well below the 50-mark which separates expansion from contraction, what we may have here is an unequivocal recession warning.

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