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By Tamora Vidaillet
PARIS, Feb 9 (Reuters) - The French economy is expected to contract by 0.6 percent in the first three months of the year, according to a Bank of France survey released on Monday, which said most business managers remained gloomy towards the future.
The euro zone's second-biggest economy managed to grow ever so slightly in the third quarter of last year and is expected by many economists to have contracted by 0.9 percent between October and December.
If the economy shrinks by 0.6 percent between January and March, as the Bank of France expects, this would suggest the pace of recession, the country's first in around 15 years, may ease even if the pain is likely to prove prolonged.
"Forecasts point to a further decline both in activity and demand over the short term," the central bank said in a statement on its Web site www.banque-france.fr/home.htm.
Industrial activity remained weak but stable in January as declines in the production of intermediate goods offset a rise in output of automotive and capital products.
New order flows slackened, albeit at a slower rate than in previous months, as order books extended their downward trajectory.
The decline in services activity eased overall last month but continued to prove significant in the temporary work sector.
Inventories of final goods remained well above desired levels, fuelling pessimism among managers in most sectors.
"Business managers' forecasts for the coming months remain on the downside in all sectors with the exception of consumer goods and agri-food industries," the survey said.
Still, the business sentiment indicator for industry rose to 70 in January from 67 in December.
Some recent economic indicators have spurred hopes the intensity of the downturn in France may have stabilised after what is expected to have been a particularly wrenching fourth quarter. The government is due to release Q4 figures on Friday.
But with demand expected to suffer and job losses set to accelerate this year, economists foresee the government lowering its official 2009 growth forecast of between 0.2-0.5 percent soon.
Positive growth could creep in at the end of this year and be a factor for 2010, on average, Bank of France Governor Christian Noyer told France Culture radio on Saturday.
"There are a few reasons which make us think that it is not unreasonable to hope for an end to the recession by the end of the year," he said. (Editing by Chris Pizzey)