Tuesday, the Bank of France said its business sentiment indicator for the country's industries rose to 75 in April from March's revised reading of 74. It was in line with the consensus forecast.

The central bank said the contraction in industrial activity was more limited than in previous months due to the slowdown in the decline in production across all sectors, and particularly in the intermediate goods sector.

The capacity utilization rate fell slightly again and remains at a very low level. The flow of new orders continued to slacken both in France and from abroad, albeit at a slower pace than in the previous month. Order books are still deemed to be far below targeted levels. Inventories of final goods continued to diminish while remaining above the normal levels.

The outlook for activity in the short term is picking up although differences across sectors were observed. Improvements have been seen in the automotive, agri-food and consumer goods sectors. Output growth is expected to remain negative in the intermediate and capital goods sectors.

Further, the sentiment index for the country's service sector fell to 75 in April from 77 in March. Although the slowdown in activity was more moderate than in March, demand registered a further significant decline in April. Both prices and staff levels continued to fall, in line with the trend observed over the previous months. The outlook for activity in the coming months remains to the downside, in particular in business services.

Moreover, the central bank said the monthly index of business activity suggests the French economy will contract 0.6% in the second quarter of 2009.

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