French industrial output rises in May

9th July 2010, Comments 0 comments

French industrial output rose 1.7 percent in May from the previous month, official figures showed Friday, but analysts cautioned that the sector's production potential remained weak.

The May spurt followed a 0.5 percent decline in April, according to the national statistics institute INSEE.

The manufacturing sector, which covers industrial processing plants, showed a gain of 0.5 percent in May after 0.3 percent in April.

Between March and May overall industrial output rose 2.2 percent while manufacturing industry output gained 2.4 percent.

"The progression in manufacturing output for the fifth consecutive month and the rebound in industrial production confirms that economic growth in the second quarter should be better oriented than in the first quarter," a source at the finance ministry said.

INSEE is forecasting a 0.5 percent expansion in gross domestic product in the second quarter after a weak 0.1 percent in the first three months of the year.

"In the last 12 months industrial production has re-gained half the ground it had lost because of the world financial crisis," the ministry source said.

Economist Alexander Law of research group Xerfi agreed that the INSEE report was "clearly positive" but warned that "uncomfortable" months lay ahead.

Inventory buildup by manufacturers is winding down "without having had a major effect on growth," he said.

"Order books are running low, the economic situation remains fragile in France and Europe and a decline in (industrial) activity in the third quarter cannot be ruled out."

At Natixis bank, analyst Adele Renaux said: "We continue to believe that industrial production will suffer with the end of stimulus measures and in the face of plans to curb deficits and a slowdown in world trade."

© 2010 AFP

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