PARIS, Sept 26 French firms' business confidence held steady for the third straight month

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PARIS, Sept 26 (Reuters) French firms' business confidence held steady for the third straight month in September on the back of rising foreign orders, as firms appeared to shrug off financial market turmoil and the surging euro.

The survey of 4,000 French companies by state statistics body INSEE showed business morale at 110, surprising analysts and beating the 108 forecast of economists polled by Reuters.

''There is no sign of two things -- either the financial market turmoil or the strong euro. It shows French industry is slightly more resilient than it's given credit for,'' said Alexander Law of the Xerfi consultancy said.

The figure was 10 points above the long-term average, he said, adding: ''That is all the more surprising that Ifo slumped yesterday.'' German business sentiment fell to its lowest level in over 1-1/2 years in September, turmoil on financial markets exacerbating concerns about an economy already hit by the strong euro and surging oil prices.

INSEE, which does not release business confidence figures during the August holiday, said the general business outlook component had contracted strongly, falling to 7 from 18 in July, its lowest level since March.

But Economists said France had been less buffeted by global turmoil than Germany's export-orientated economy, noting the foreign orders and demand component had jumped to 11 from 6 the previous month, and that the personal business outlook had climbed to 16 from 14.

Wednesday's data came a day after surprisingly strong figures in July and August for consumer spending, which has been the mainstay of the French economy given weak exports industry's mounting concerns over the strong euro.

''It's much better than we thought.'' said Dominique Barbet, senior economist at BNP Paribas. ''For the moment the (financial markets) crisis hasn't affected the real economy.'' ''We have a strong growth forecast for GDP for the third quarter of 0.6 percent. So this is news that goes in the direction of our forecast for a rebound in activity,'' he said.

STRONG EURO President Nicolas Sarkozy's government needs strong growth if it is to meet its 2007 growth target of 2.0-2.5 percent and keep a pledge to euro zone partners to trim its budget deficit.

The OECD and the European Commission recently cut their 2007 forecasts to 1.8 percent and 1.9 percent respectively, calling into question official French forecast.

Sarkozy has repeatedly blamed policies of the European Central Bank for sluggish domestic economic growth and the euro's strength, a charge rejected as outdated by ECB president Jean-Claude Trichet on Sunday.

The euro hit a record high against the dollar on Wednesday, climbing to $1.4163 on electronic trading platform EBS in early Tokyo trade, before retreating.

The single currency's surge has, nevertheless, forced French luxury groups such as Hermes and LVMH to raise prices in markets such as Japan to protect earnings.

Drinks group Pernod Ricard said last week that every one percent move in the euro above $1.30 - the average in its last financial year - would knock 7 million euros off operating profit. It has responded by increasing the share of dollars in its debt to give it a natural hedge against the euro's climb.

REUTERS MP GC1421

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