(RTTNews) - French inflation fell to almost a decade low on falling oil prices, while business sentiment dropped to its lowest level on record, official reports showed Friday.

Data released by the statistical office, INSEE showed that the consumer price index, or CPI, rose at a slower annual pace of 0.7% in January, compared with 1% increase recorded in December. It matched economists’ expectations and was the lowest since September 1999.

The main factor behind the fall in the annual inflation was energy prices, which plunged 9.8% from the previous year. Prices of manufactured products including energy dropped 2%, while food prices were up 0.8%.

The CPI dropped 0.4% on a monthly basis due to a fall in prices of clothing and footwear and also of other manufactures, because of winter sales. Upon seasonal adjustments, the CPI climbed 0.1% month-on-month and 0.8% over the previous year.

Further, the Harmonized index of consumer prices, or HICP, slid 0.4% compared to December, while it grew 0.8% year-on-year. Both figures were in line with the consensus forecast.

Separately, the INSEE said business confidence in February hit its record low after being stable in past two months. The business confidence index fell to 68 in February from 73 recorded in January. Economists were expecting the reading to remain unchanged at 73.

The second biggest Eurozone economy contracted 1.2% in the fourth quarter from the third. Economy Minister Christine Lagarde had said crisis in the automobile sector had a significant impact on French gross domestic product in the final three months of 2008.

French President Nicolas Sarkozy had unveiled various measures to rescue the economy, including the recently announced EUR 2.6 billion to help families survive in the crisis. This followed an initial EUR 26 billion announced in December. The government had also offered EUR 6 billion to automobile makers.

The indicator measuring general production outlook fell to minus 76 from minus 75 and the personal production outlook indicator fell to minus 46 from minus 39. The fall in personal production outlook indicator shows that activity in manufacturing industry would continue to fall in coming months.

The gauge for general outlook on prices stood at minus 33, down from minus 32 and the personal price outlook indicator declined to minus 12 from minus 7, the INSEE said.

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