Paris, Nov. 28 (Bloomberg) -- French manufacturers' confidence probably fell to a nine-month low in November, a sign Europe's third- largest economy may struggle to grow this quarter, analysts said in advance of a government report. An index based on a survey of about 2,000 companies by the national statistics office dropped to 93 this month from 94 in October, according to the median forecast of economists surveyed by Bloomberg News. ``Growth might decelerate further,'' said Herve Goulletquer, an economist at Credit Lyonnais SA. ``We expect some weakening of confidence among industrialists and a rise in the jobless rate'' which may dampen household spending.
Business confidence in Germany, France's biggest trading partner, dropped to a 10-month low in November. The French and German economies, which account for about half of the 12-nation euro economy, barely grew in the third quarter. Companies such as Alcatel SA and Vivendi Universal SA have pared staff and investment. The CAC 40 Index, the benchmark for French stocks that has risen by a fifth since reaching a five-year low last month, is still down 28 percent this year. That makes it harder for companies to raise funds and undermines households' savings. The statistics office, Insee, is due to release its report on manufacturing confidence at 8:45 a.m. Paris time. Manufacturing accounts for about a fifth of the French economy.
Concerns About Iraq
Finance Minister Francis Mer has said the country needs the Iraqi ``question mark'' to be lifted to expand 2.5 percent next year, as forecast by the government. It expects the economy to grow 1 percent this year, the weakest pace since the 1993 recession. French manufacturers, and food and energy producers said they plan to boost investment by 4 percent next year after trimming capital expenditure by 7 percent this year, an Insee survey showed earlier this month. The rebound will mostly take place in the second half of next year, Insee said. Futures trading suggests the European Central Bank, which left its main lending rate at a 2 1/2-year low of 3.25 percent at its last meeting on Nov. 7, will reduce borrowing costs as soon as next week. The implied yield on the three-month Euribor futures contract due in December has fallen 10 basis points since then to 2.96 percent. A basis point is 0.01 percentage point. The day before the ECB meeting, the Federal Reserve reduced its target rate to 1.25 percent, the lowest in 41 years.
Easing Labor Laws
French manufacturing confidence may also have been damped by blockades set up farmers and truckers earlier this month, analysts said. Executives' mood may improve next month as agreements on pay and pricing between retailers, employers and workers limited the road deadlock to a couple of days. To encourage manufacturers to hire, France's seven-month-old conservative government is loosening legislation passed by its Socialist predecessor that made firing harder. Unions say the change is ill-timed and employer groups say it doesn't go far enough. To stem the rise in joblessness, already at a two-year high of 2.43 million, France is also cutting corporate and household taxes this year and next. Tax cuts helped boost household confidence and spending last month.
The government's margin of maneuver is limited because it received a formal warning from the European Commission, which forecasts that France's deficit will reach 2.9 percent of GDP next year as the economy expands by 2 percent. That's just 0.1 percentage point shy of the 3 percent limit set by European Union's Stability and Growth Pact, beyond which offending governments risk being fined if they don't take corrective action. Germany chose to raise taxes as it's set to breach the threshold this year. //www.quote.bloomberg.com