Confidence improves among French businesses

French business confidence arrested a seven-month decline in February, the latest sign that Europe's second-largest economy may be starting to recover after unexpectedly expanding in the fourth quarter. Sentiment among factory executives held at 92 after January's reading was revised from an initially reported 91, Paris-based statistics office Insee said yesterday. The reading matched the median forecast of 18 economists surveyed by Bloomberg News. A gauge of the outlook among businesses rose to a six-month high. The indicator "suggests further stabilisation in the business climate with upside surprises possible," said Fabrice Montagne, an economist at Barclays Capital in London. "Looking ahead, however, we are still worried about a below long-term average reading in the first quarter and see room for the economy to contract slightly." The February confidence reading of 92 is the lowest in almost two years. Still, the order books gauge rose to minus 26 from minus 28 and the production outlook increased to minus 27 from minus 36. Cautious start After predicting in Dec-ember that the French economy would shrink in the fourth quarter of 2011 and the first quarter of 2012, Insee said last week that the economy grew 0.2 per cent in the three months through December, helped by external trade and business investment. "The word for the start of the year is ‘caution,'" Air Liquide SA Chief Executive Officer Benoit Potier said on February 17. In November and Dec-ember, the big companies "closed their taps. Now they're starting to come back" and we're seeing a "return to normality."