The figure, well below the long-term average of 100 and the lowest result since a reading of 89 in February 2010, fell short of an average forecast of economists' expectations for a slight rise to 95 as polled by Reuters.

The composite index gauges business cycle sentiment by combining the survey's seven main components: stocks, past production levels, total and foreign order book levels, personal price and production outlooks and views on general production.

Each component is calculated by adding together the percentage of survey respondents with a positive opinion and the percentage of respondents with a negative opinion.

COMMENT

MANUEL MALEKI, ECONOMIST, ING

"The implementation of an austerity plan in January, poor international climate, and the unclear presidential campaign with no clear view about the favorite's platforms have not reassured the French business sector. The retail sector seems particularly depressed with a fall to 89 from 93 in December, a particular bad sign just at the beginning of the winter sale season. Independent of the economic situation, without a clearer political campaign and clearer positioning of the candidates, business confidence should continue to suffer."

TULLIA BUCCO, ECONOMIST, UNICREDIT

"Although disappointing, the January outcome aligns the INSEE business confidence with the manufacturing PMI, which had fallen more sharply since last summer, but had already shown signs of recovery in December. Accordingly, we will be looking closely at tomorrow's January PMIs to find a confirmation that the worst in terms of GDP growth could be behind us. For the time being, the INSEE points to broadly flat GDP growth at the beginning of Q1."

MARION LABOURE, ECONOMIST, BARCLAYS CAPITAL

"Today's print confirms our view that we will see little growth in France in Q1 (-0.1% q/q), as the sector will feel the pinch from less favorable global economic conditions as well as fiscal tightening."

JEAN-LOUIS MOURIER, ECONOMIST, AUREL BGC

"The contraction in industrial production accelerated while stocks increased which shows that demand fell quite a bit. The new orders are pointing in the wrong direction in industry. We entered into recession in recent months and there won't be a rebound in the beginning of the year.

LINKS

For more data, the French statistics website is www.insee.fr

(Reporting by Leigh Thomas)