The outlook for French business activity in the coming months is positive, but firms have cut their investment expectations for 2005 and the jobs market remains soft, reports showed on Wednesday.
The Bank of France, which sounds out some 12,000 firms each month, said its October business survey pointed to economic growth of 0.5 percent in the fourth quarter of this year for average annual growth in 2005 of 1.6 percent.
France's conservative government forecasts growth of 1.5-2.0 percent in 2005 and 2.0-2.5 percent in 2006.
"The outlook for activity over the coming months is on an upward path across all sectors," the central bank said in a statement.
The bank did not say whether its October survey was completed before a wave of rioting in France that began on October 27. However, economists expect the unrest, which has abated in recent days, to have little impact on French economic growth.
Separately, Labour Ministry figures showed French wages rose 1.0 percent in the third quarter of this year and 2.8 percent year-on-year, the highest annual rate in over a decade.
The year-on-year wage rise was nevertheless only slightly higher than levels seen in recent years and economists said the increase was moderate. The annual measure has been around 2.5 percent for the last four years in France.
"It is indeed increasing, it is indeed high compared to past standards, but it's still very moderate," UBS economist Stephane Deo said.
European Central Bank President Jean-Claude Trichet says the ECB is exercising "strong vigilance" because of risks of "second round" inflation as a consequence of high oil prices, namely wage inflation.
Markets believe the ECB could raise its key interest rate as early as December.
A report on the French jobs market countered the positive tone of the Bank of France business survey, and figures last week showing growth accelerated in the third quarter.
Non-farm payrolls rose just 0.1 percent in the third quarter from the second, national statistics office INSEE said.
The government is trying to reduce the unemployment rate, which fell to 9.8 percent in September, and has introduced a series of labour market measures to boost jobs in recent months.
"The payroll data shows that the industrial sector is looking for productivity gains and that employment growth is moderate," said Jean-Louis Mourier, economist at investment house Aurel Leven.
The small rise in payrolls in the third quarter was not very dynamic given a 0.7 percent jump in French growth in the same period, said Nicolas Bouzou, economist at economic consultancy Xerfi. "This number is mediocre," he said of the payrolls rise.
INSEE also published a report showing French industry investment is set to fall slightly in 2005, reversing previous expectations for a rise. The investment survey was largely completed before the riots began, the statistics office said.
In more downbeat news, a TNS Sofres survey showed French consumers were set to curb their Christmas spending this year. The research group questioned 1,000 people for the survey, which it conducted on November 8 and 9, just after the worst riots.
The survey showed 38 percent of those questioned expected to spend less than last Christmas, 5 percentage points more than in a similar survey a year ago. Sixteen percent expected to spend more, and 45 percent the same, with 1 percent making no reply.
Wednesday's mixed reports from France followed a batch of recent positive readouts on the economy. Germany gave a boost to prospects for a modest recovery in Europe on Tuesday with a report showing higher than expected growth in the third quarter.
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