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French business morale at three-year high

French business morale was at its highest for nearly three years in March, adding to signs the eurozone’s number two economy is emerging from stagnation on the back of lower oil prices and a weaker euro.

The composite indicator of morale rose to 96 from 94 in February, its highest since April 2012, lifted by retail trade and by an improvement in the services sector.

The industrial morale reading eased one point to 99, staying very close to the 100 long-term average, as expected by analysts surveyed by Reuters.

“The increase in confidence is welcome and backs our view that activity in the French economy is likely to have accelerated during the first quarter of the year,” IHS Global Insight analyst Diego Iscaro said.

We expect confidence to gradually improve

“Although we expect firms to remain relatively cautious regarding the economic outlook, we expect confidence to gradually improve over the coming months.”

Although the government was still seen suffering a heavy defeat in local elections this weekend, the figures will bring some relief to President François Hollande, whose popularity has been hit hard by France’s economic plight and for failing to honour his promise to cut unemployment.

Markit’s preliminary composite purchasing managers’ index had shown on Tuesday that the private sector in the €2-trillion economy expanded for the second straight month in March.

“This supports our view that growth in the French economy is improving a little in the first quarter.

“We expect first quarter GDP to grow 0.3 per cent quarter-on-quarter following the fourth quarter’s 0.1 per cent,” BNP Paribas economist Evelyn Herrmann said in a note.

While improving by one point, morale in the services sector was only at 93, far from the 100 long-term average, prompting analysts to point out that growth was still likely to be slow.

The government is targetting 1 per cent growth this year after the country eked out 0.4 per cent in extra output in 2014.

The Socialist party is expected to lose many of the 61 local “departements” it now holds in the run-off of local elections on Sunday.

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