France's economy posted no growth in the first quarter and there are no signs of a strong recovery in activity in the coming months, according to a Bank of France survey on Tuesday.

In its monthly report, the Bank of France indicated that the euro zone's second largest economy avoided a recession, after it grew by 0.2 percent in the fourth quarter.

However, it said that activity was likely to remain stable in the coming months, a picture confirmed by soft manufacturing data on Tuesday from the INSEE national statistics office.

The Bank of France said that its business sentiment indicator for industry was unchanged in March at 95, a 3-month low it reached in February.

It noted that industrial activity improved, with rises in pharmaceuticals and chemicals, transport equipment and hi-tech goods. "Forecasts suggest that activity will remain stable in the short term," the bank said.

Economists said that with fiscal tightening across Europe weighing on external demand for French goods and with rising domestic unemployment likely to peak next year above 10 percent, it was no surprise the growth outlook was weak.

"The figures are a little bit disappointing," said Michel Martinez, economist at Societe Generale in Paris, who forecasts modest 0.5 percent growth in France for the year as a whole.

"They are in line with the cyclical picture of the French economy which stalled in the fourth- and the first-quarter and where the recovery will be weak," he said. "You cannot have a tough fiscal adjustment over two years and expect strong growth at the same time."

President Nicolas Sarkozy, who trails his Socialist rival in polls ahead of next month's crucial presidential runoff, has made cutting France's deficit a top priority. His government cut the deficit to 5.2 percent of GDP last year, below its target of 5.7 percent, and has pledged to balance the budget by 2016....