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Last Updated: Monday, 25 September 2006, 13:45 GMT 14:45 UK
Weaker exports hit French morale
A French flag factory
French exporters say the strong euro is hurting business
French business confidence dipped in September, according to official data, as demand for exports from Europe's third-biggest economy weakened.

Strong exports and domestic demand saw the economy grow at its fastest rate in five years in the second quarter.

But the figures from statistics office Insee showed demand for French exports had fallen in September.

As a result, its business climate index fell to 107 from 108 in July. Insee does not produce a figure for August.

Confidence slipping

"Both exports and strong consumer spending helped growth in recent months," said Marc Touati, an economist at Natexis Banques Populaires.

"Now exports are down due to a stronger euro and a slowdown in Germany. That is bad for activity."

The French economy is being supported by domestic consumption - figures released last week for consumer spending during August showed the biggest monthly jump in seven years.

The concern over exports is echoed in Germany, where economic growth also reached a five-year high in the second quarter of 2006.

A survey from Germany's ZEW economic institute last week showed a sharp fall in investor confidence.

Analysts said people were worried about the potential for higher eurozone interest rates and a possible drop in German exports in light of the slowdown in US economic growth.

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