The Bank of France said today its latest business survey pointed to 0.4 per cent growth in the first quarter of 2005 and said output prospects were less favourable than before.
The central bank, which sounds out some 12,000 companies each month, gave a reading of 101 for its business climate index in February, down from 105 in January.
The index stood at the same level as a year earlier. The central bank's previous business survey had indicated expected first quarter growth of 0.5 per cent. "Production expectations, which remained positive, were less favourable than previous months," the Bank of France said in a statement.
"The flow of new orders on domestic and foreign markets increased at a very moderate pace. The assessment of order books was a little less positive, while remaining above levels deemed normal," it said.
The cut in the first-quarter growth forecast was a blow to the conservative government, which says it sees French economic growth hitting 2.5 per cent this year.
Many economists say this projection might be optimistic, pointing to modest business confidence and an unemployment rate at a five-year high of 10 per cent. French consumer confidence improved in February, recent data showed, coming in slightly above expectations.
But economists cautioned that job worries could weigh on households' future willingness to spend. Prime Minister Mr Jean-Pierre Raffarin reiterated on Sunday that job creation remained a main priority for his government.
Mr Raffarin has said he wants to cut joblessness by 10 per cent by the end of this year.