UPDATE 2-Bank of France sees 0.5 pct GDP growth in Q1

By Vicky Buffery

PARIS, Feb 8 (Reuters) - The French economy is expected to grow by 0.5 percent in the first quarter of 2010, the Bank of France said in its latest survey on Monday, highlighting an upturn in industrial activity at the start of the year.

It was the central bank's first gross domestic product forecast for January to March. It is also expecting a 0.5 percent expansion in the final quarter of 2009.

'In January, industrial activity rebounded across the board, in particular in the intermediate and automobile sectors,' the Bank of France said.

'Order books improved somewhat thanks to the stronger flow of new orders, but still remain slightly below their long-term average,' the central bank said.

The bank's business sentiment indicator for industry rose to 104, the highest since March 2008, from an upwardly revised 102 in December. It was previously given as 101.

Industrial activity in the automobile sector was helped in January by the surge in car sales at the end of 2009, when consumers rushed to take advantage of the government's car scrapping subsidy before its gradual removal.

Sales of new cars rose 48.6 percent year-on-year in December, according to the French carmakers association.

But car sales in January were up a more modest 14 percent year-on-year for the first month of 2010, and economists fear activity in the car sector may wane as the incentives run out.

For the short-term, the Bank of France said it expects overall industrial activity to continue to rise slightly, while the outlook for the services sector should also improve.

The services business sentiment index rose to 89 in January, the highest since October 2008, from 88 the previous month.

But the central bank's outlook for first quarter gross domestic product is slightly more optimistic than the 0.3 to 0.4 percent growth forecast issued by national statistics office INSEE last week.

It is also ahead of a median forecast from a Reuters poll of economists conducted in January, which is for 0.4 growth between the months of January and March.

Preliminary data for French GDP for the fourth quarter of 2009 is due out on Feb 12.

(Editing by Toby Chopra and Andy Bruce) Keywords: FRANCE ECONOMY/ ([e-mail]; [phone]; Reuters Messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.