French businesses start the year on a high as German industry is hit by snow

 
Julian Harris
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FRENCH business confidence spiked to a three-year high in January, the Bank of France revealed yesterday.

The surge prompted the Bank to forecast growth of 0.8 per cent for the first quarter of this year.

Such an expansion in GDP would be the fastest quarterly growth rate in seven years and more than double what many analysts are forecasting.

The index for French industry morale, gathered for the Bank, jumped to 110, from 107 in January. In services, the indicator rose above the 100 mark to 101, from December’s score of 99.

“These numbers confirm that the recovery is still on track in the second largest economy of the Eurozone,” responded ING’s Oscar Bernal.

“We expect GDP growth in France to remain just below two per cent this year,” he added. Although some economists consider this too ambitious, president Nicolas Sarkozy’s conservative government has based its 2011 budget on a growth rate of two per cent.

Meanwhile, the Eurozone’s largest economy, Germany, suffered a severe knock from the December snow. Industrial production fell by 1.5 per cent compared to November, largely due to a devastating 24.1 per cent crash in construction – a “weather-related” shock, according to Ben May of Capital Economics.

“Despite this disappointment, the industry was the backbone of the German recovery last year, growing by almost 10 per cent,” added ING’s Carsten Brzeski.