Gee, things are not going very smoothly with the new European Union constitution so far!
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French business confidence falls
By Ralph Atkins in Frankfurt
Published: March 29 2005 17:54 | Last updated: March 29 2005 17:54
French business confidence has slumped to a 15-month low, following similar falls in Germany and Italy and adding to the gloom about the eurozone's economic outlook.
The INSEE statistical office said on Tuesday that its business climate index dropped from 104 in February to 101 in March its lowest since December 2003.
Economists blamed higher oil prices and the strength of the euro, which is hitting eurozone exports. But the results also come as opinion polls suggest the French may vote against the European Union constitution in May's referendum.
Jean-Marc Lucas, economist at BNP Paribas, said a No vote would hit confidence “because Europe's construction is rather positive for companies”.
France has been among the eurozone's best performers in the past year. But Tuesday's data added to fears that growth among the 12 eurozone economies will remain weak for much of this year or beyond, suggesting that the European Central Bank is too optimistic in expecting a pick-up after a weak second half of 2004.
France, Germany and Italy together account for about 70 per cent of the eurozone's gross domestic product. But on top of oil and currency effects, monetary tightening in the UK and US could also slow growth in the eurozone's main export markets.
Gwyn Hacche, economist at HSBC, said post-war experience suggested that the slowdown in industrial production growth since mid-2004 could last one year or 18 months: “Far from the ECB's expectation of growth gaining momentum during the course of this year, we see growth decelerating.” Last week, Germany's Ifo institute reported business confidence had fallen to an 18-month low this month. But the gloom appears to be growing sharply in Italy, where confidence fell to a 20-month low, according to the ISAE research institute.
Italian GDP figures for the last quarter of 2004 were revised downwards last week to show a fall of 0.4 per cent on the previous quarter, with exports plunging.
Silvio Berlusconi, Italy's prime minister, has blamed the euro's strength against the dollar. But economists say Italy has failed to follow other eurozone countries in restructuring. |
