French business morale sank unexpectedly to a 15-month low in March, raising fears that a strong euro, high oil prices and weak domestic demand could plunge the industrial sector into recession. National statistics office INSEE said on Tuesday its monthly index based on interviews with business leaders fell to 101 from 104 in February, hitting its lowest since December 2003. The reading was well below the consensus forecast in a Reuters poll of economists of no change from February.
"The worry about French economic growth is due to three factors: oil, a strong euro, and domestic demand," said Emmanuel Ferry, economist at investment house Exane.
"France is highly vulnerable to those three factors. If that trend keeps going, we could risk a brief recession in the industrial sector," he added.
Oil prices rose to record highs in March and the euro traded back above $1.30 after hovering below that level for much of February. A stronger euro makes French exporters' products more expensive outside the eurozone.
In Tokyo, French Finance Minister Thierry Breton told Japanese Finance Minister Sadakazu Tanigaki that a weaker US dollar was a concern for the French economy, a Japanese Finance Ministry official said on Monday.
Separately, INSEE said French producer prices rose 0.3 percent in February for a 3.1 percent increase year-on-year. Economists polled by Reuters had expected producer prices to increase 0.4 percent month-on-month.
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