(Bloomberg) -- French manufacturing confidence unexpectedly plummeted to a four-year low in October due to a strongly worsening outlook for production and orders.
The gauge fell to 92 from 99 in the previous two months, according to statistics agency Insee. It had been forecast to remain unchanged, according to the mean estimate of economists surveyed by Bloomberg.
Overall business confidence dipped slightly to 97 from 98, Insee said, as an uptick in the services sector failed to compensate for the more sombre mood in manufacturing.
The confidence readings give a first indication of how businesses are reacting to government plans for sweeping tax increases and spending cuts to get a grip on inflated budget deficits.
If weaker confidence leads to actual activity, it could exacerbate the fiscal difficulties that were fueled by poor tax receipts from a prolonged contraction in business investment and near-stagnant consumer spending.
The French economy has held up better than some European peers and is on track to record around 1% growth this year. But momentum is supported almost solely by exports and public outlays, while investment and consumer spending have at best stagnated. The underlying weakness has hurt tax revenues, further hitting the public finances that the government is struggling to repair.
--With assistance from Barbara Sladkowska.
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