By Brian Rohan
PARIS, Dec 19 (Reuters) - French business sentiment in December fell to its lowest in the 32-year history of the survey, a level matched only in June 1993, data showed on Friday.
Statistics office INSEE's business confidence index fell to 73 in December from a downwardly revised 79 in November, below economists forecasts for a smaller drop to 78. November's figure was initially reported at 80.
"It's been a shocker. What's likely now is a more acute recession than initially expected, with fourth quarter growth close to minus 1.0 percent," said economist Guillaume Menuet, at Merrill Lynch in London.
Opinions on past manufacturing activity declined noticeably, stocks of finished products continued to mount and were judged well above long term average levels, INSEE said.
The French economy grew just 0.1 percent in the third quarter of this year. Unemployment has risen above the symbolic 2 million mark, and data for the fourth quarter has been dire, with industry particularly in trouble as output saw its largest annual fall on record in October.
"We're ending the year in a terrible state as far as business activity is concerned and we'll begin 2009 in the same condition," said economist Bruno Cavalier at Oddo brokerage.
Earlier on Friday, INSEE said in its quarterly forecasts that France was set for a deeper recession than previously expected, contracting 0.8 percent in Q4 with growth staying in negative territory for two more quarters to come.
But with downbeat data accumulating, some economists were considering even that forecast optimistic.
The survey, which focuses on some 4,000 companies, pointed to a thinning of orders in both foreign and domestic markets as global demand slows, while prices looked to be scaled back in coming months.
Business leaders in France's largest trading partner Germany showed similar concern on Thursday, as morale fell for a seventh month running and the country seemed headed for what could be its deepest post-war recession.
With the economy grinding to a halt in both Germany, the euro zone's biggest economy, and France, the bloc's second largest, economists said pressure would be on the European Central Bank to stimulate growth with monetary policy.
"With the risk of a significant disinflation by the mid-point of 2009, the ECB is going to continue cutting," said Merrill Lynch's Menuet. (Editing by Mike Peacock/Tony Austin)