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By Tamora Vidaillet
PARIS, Dec 9 (Reuters) - France's trade deficit swelled to record levels in October as demand for its exports such as cars and steel-based products fell in its core European markets.
The deficit for France -- the world's fifth-largest exporter, according to 2007 figures -- ballooned to 7.066 billion euros ($9.08 billion) against a revised 5.961 billion in September, confounding expectations for a 5.65 billion euro shortfall.
France's growing deficit figures coincided with data that showed German exports weakening month-on-month.
French exports fell to 32.564 billion euros in October from 34.089 billion in September, pointing to a dismal reading for industrial output figures due on Wednesday and adding to a picture of an economy entering recession despite unexpected growth, albeit of just 0.1 percent, in the third quarter.
"These are terrible, terrible figures. It is a huge, huge new record," said Alexander Law, chief economist at Xerfi.
"We are in recession in Germany, in the UK, we're heading to recession in Spain, Belgium and the like, and those are our main commercial trade partners," he said. National statistics bureau INSEE singled out the car and steel sectors as among the worst affected by falling sales to euro zone countries, which buy nearly two thirds of French exports.
Demand from Germany, Spain and Belgium dropped sharply while it crumbled from countries outside the 27-nation bloc, INSEE said.
"We can do better," Economy Minister Christine Lagarde told Reuters after giving a speech at a Paris conference on innovation.
DRAG ON GROWTH
Sales of cereals and buoyant deliveries of transport equipment were not enough to offset the decline in other exports, INSEE said.
Airbus aircraft sales rose to 27 in October from 20 in September, raising income to 1.486 billion euros from 1.153 billion euros.
French imports slipped to 39.630 billion euros from a revised 40.050 billion euros in September.
October's monthly decline in exports, which accounted for roughly a quarter of French gross domestic product (GDP) last year, follows a raft of recent data pointing to slowing economic growth and rising unemployment.
"We're likely to see a significant contraction in the fourth quarter," said Jacques Cailloux, an economist with Royal Bank of Scotland in London.
Analysts widely expect France to officially enter recession in the final three months of this year and for the economic malaise to persist in 2009.
Highlighting growing budgetary pressures facing the government, separate data released on Tuesday showed the country's budget deficit widened to 60.7 billion euros at the end of October from 56.55 billion in September.
"Clearly the widening of France's budget and trade deficits appears unstoppable," said Marc Touati, an economist with Global Equities Brokers in Paris. ($1=.7780 Euro) (Additional reporting by Anna Willard, Brian Rohan and James Mackenzie; Editing by Ruth Pitchford)