Car industry drags down French industrial output

9th December 2005, Comments 0 comments

PARIS, Dec 9 (AFP) - French industrial production fell sharply in October compared with September, casting doubt on the strength of a widely forecast economic recovery and revealing difficulties for the French auto sector, analysts said on Friday.

PARIS, Dec 9 (AFP) - French industrial production fell sharply in October compared with September, casting doubt on the strength of a widely forecast economic recovery and revealing difficulties for the French auto sector, analysts said on Friday.

Data from French statistics office INSEE showed that industrial production fell by 2.5 percent in October compared with September after growth of 0.6 percent in September from the figure for August.

On the foreign exchange market in London, analysts said that the fall of French production had been a factor behind a weakening of the euro on Friday.

Commenting on the industrial production data, an analyst at Natexis Banques Populaires, Alexandre Bourgeois, said: "That industrial production fell by 2.5 percent (in October), this is without any doubt a huge surprise and a clear disappointment."

INSEE said that the data had been corrected for variations between October and September, including differences in the number of working days, but did not allow for a public holiday when many workers had taken additional time off.

Nevertheless, analysts said that the data revealed worrying developments despite some attenuating factors. They pointed to production in the auto sector which declined by 9.2 percent in October compared with the figure for September.

An analyst at brokerage Exane, Emmanuel Ferry, said that the auto sector was the driving force behind the overall fall in industrial production, the biggest monthly decline since August 1999.

"The automobile sector continues to upset the industrial production figures," said Ferry.

French carmakers, which have seen a fall in sales since the start of the year, stopped a number of their assembly lines during October and laid off workers temporarily.

An economics expert at INSEE, Michel Devilliers, said that they had opted for production stoppages instead of lowering their prices to move unsold cars.

"One can conclude that they (carmakers) took the opportunity to reduce their accumulated stocks rather than keeping the stocks and adapting their commercial strategies," he said.

The data from INSEE showed that output had declined in all industrial sectors, with the exception of farming and food production and construction.

The sharpest fall was in the auto sector, but output by the manufacturing sector declined by 2.4 percent in October after rising 1.3 percent in September.

Production in the farming and food sector was stable after a fall of 1.3 percent in September. Output from the construction industry rose 0.7 percent in October after stagnating in September.

An analyst at Paris-based economics consultancy Xerfi, Nicolas Bouzou, said that the fall in industrial production was a blow to hopes of a strong recovery in the fourth quarter.

The French economy expanded by 0.7 percent in the third quarter.

"This morning's figure is worrying because it shows the vulnerability of the the small recovery started this summer," Bouzou said, adding that the fall of the euro against the dollar, increased levels of investment and stable oil prices would normally help to boost growth.

Copyright AFP

Subject: French news

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