Paris, April 29 (Bloomberg) -- French manufacturers' confidence waned in April, mirroring declines in Germany and Italy, indicating the end of the war in Iraq failed to generate any sign of improving orders to warrant increases in production. An index based on a government survey of about 2,000 companies fell to a 15-month low of 92 from a revised 95 in March. Economists expected a level of 95. Separate indexes showed falling export orders and general business sentiment sinking to the most pessimistic since the survey began in March 1976. ``It isn't a rosy picture'' said Alain Dassas, Renault SA's senior vice president for finance, commenting on prospects for the western European car market in a conference call on Friday after the automaker's first-quarter sales fell. Europe accounts for 90 percent of sales for Renault, France's second-largest exporter.
The European Commission has predicted the $7 trillion economy of the dozen countries sharing the euro probably shrank in the first three months of the year and will barely grow in the second quarter because the build-up to the war in Iraq dashed consumer confidence and led companies and households to delay spending. France's economy contracted 0.1 percent in the fourth- quarter, a separate report showed, revising down the 0.2 percent growth originally reported for Europe's third-largest economy. The main revisions came to corporate investment and exports, which declined by more than estimated two months ago.
Wider Pessimism
Italian business confidence fell in April to the lowest since January 2002. In Germany, Europe's largest economy, confidence slid to a 16-month low. France, Germany and Italy combined account for more than two-thirds of the euro region's economy. The U.S.-led war in Iraq began March 20 and most fighting ceased April 14, helping push oil prices to a 5 1/2-month low as concerns eased about supply disruptions. Oil prices had climbed to a 12-year high before hostilities began. National statistics office Insee conducted the business confidence survey between March 24 and April 25. It estimates it received two-thirds of responses before April 14. The Organization for Economic Cooperation and Development said last week the end of the war lifted the ``most acute risk'' to global growth. It predicts the U.S. economy will lead an ``unspectacular'' recovery in the second half as companies step up production and investment. Companies have been postponing investment as exports suffered from the slowdown in growth. The euro's 22 percent rise against the dollar in the past year has also made goods from the euro region more expensive. French exports declined to a 14-month low in February.
Negative Impact
Higher raw material costs caused by the rise in oil, coupled with the euro's appreciation ``had a negative impact on operating and net income'' in the first quarter, said Jean-Louis Beffa, chief executive officer of Cie. de Saint-Gobain SA, Europe's largest building materials distributor. He expects these to dissipate in the months ahead. A separate report showed French factory prices rose 0.4 percent in March as manufacturers passed on higher oil costs to their customers. ``Our 2003 plans assume no specific economic recovery,'' said Bernard Charles, chief executive officer of Dassault Systemes SA, the world's largest maker of software used in designing products as diverse as aircraft and shampoo bottles, in a television interview. OECD economists pared their growth forecast for the euro region's economy to 1 percent from 1.8 percent it predicted in December. The Paris-based organization urged the European Central Bank to lower interest rates to revive flagging growth.
Weathering the Slump The ECB lowered its benchmark interest rate to 2.5 percent last month, the lowest in almost 3 1/2 years. The ECB's governing council next meets May 8. To weather the slump companies have been firing workers to cut costs. Alstom SA, whose power equipment generates one third of the world's electricity, said it plans to fire 3,000 workers in its power-turbo systems arm. Unemployment in France, Europe's third-largest economy, has climbed to 31-month high to raise the jobless rate to 9.2 percent of the working population. Declining job security threatens to undermine consumer confidence, the mainstay of the French economy. //www.bloomberg.com