PARIS, Nov 6 - French industry expects demand to rise in the final quarter of this year, with executives delivering their most upbeat quarterly forecast since April 2002, following surveys this week pointing to expansion in the country's manufacturing and services sectors. In its quarterly business survey, national statistics office INSEE on Thursday said an index on prospects for overall demand in the coming quarter, based on interviews with some 4,000 companies, rose to plus one in October from minus 11 in July. A negative figure shows the percentage points of respondents saying things had worsened over those seeing an improvement. The reading for the fourth quarter was the highest since April 2002. The outlook for foreign demand was also up, with a reading of plus nine compared with minus 11 in July. "Demand, both overall and foreign, has recovered and should continue to improve in the fourth quarter," INSEE said in a statement accompanying the report. Economists welcomed the news, which followed mixed signals from the French economy, the euro zone's second largest behind Germany, after it contracted in the second quarter of this year. "It's a positive report," said Deutsche Bank's David Naude. "This survey shows the outlook is improving. Businesses expect a rebound but it is not yet there," added Jean-Louis Mourier at Aurel Leven investment brokerage.
INSEE said an index measuring overall demand in the third quarter registered minus 14 after minus 24 in the second quarter. The report came after surveys this week pointed to expansion in the manufacturing and services sectors in October, though consumer morale sank to a six-month low last month and unemployment rose to 9.7 percent in September, its highest since April 2000. "Increases in unemployment should be less marked in the coming months but the jobless rate will continue its rise and weigh on domestic demand, while investment will also stay weak," said Mourier. Seeking to cut costs, companies have been shedding staff, with some of France's leading corporate names leading the way. "French companies have not yet finished adjusting, the job market has not yet reached its low point," said Guilhem Savry, economist at CDC Ixis bank. Telecommunications equipment maker Alcatel , which has said it plans to bring its headcount down to 60,000 by the end of 2003 from 113,000 at the end of 2000, said last week that industry conditions were still sluggish. "It's too early to talk about a rebound in this market," said Alcatel Chief Executive Serge Tchuruk. Separately, the Finance Ministry said that France's budget deficit hit 52.62 billion euros ($60.2 billion) in the nine months to the end of September versus 51.89 billion in the same period last year.//