French industry rallies but economy struggles
France is struggling with a record trade deficit but industry has begun the year in dynamic form.
PARIS, March 11, 2008 - France is struggling with a record trade
deficit but industry has begun the year in dynamic form, official data showed
on Monday only hours after an election setback for the right-wing government.
The trade balance, a source of concern to analysts for some time, showed a
record deficit last year of 39.560 billion euros (60.9 billion dollars),
customs data showed.
The previous record deficit was 28.238 billion euros in 2006.
At Global Equities, analyst Marc Touati said of overall data published on
Monday: "The situation remains very fragile, but is not however catastrophic."
French economists have warned for months that France has a structural trade
deficit, saying that this is broadly the result of weakening competitiveness
by French industry.
French politicians have led calls in Europe for the European Central Bank
to cut interest rates and help bring down the record value of the euro against
the dollar and other currencies, which makes eurozone exports less competitive
on international markets.
The trade figures also showed an adjusted deficit in January of 3.391
billion euros, a reduction from a revised figure of 3.954 billion euros in
Other official data from the statistics institute INSEE showed that
industrial output rose by 0.5 percent in January from the figure for December
which had gained a revised 0.6 percent in the month.
And manufactured output, excluding production of energy and by the food and
agriculture industries, rose by 1.2 percent in January, having expanded by 0.3
percent in December.
Production by the auto industry rose by 1.8 percent, having increased by
3.6 percent in December.
Analysts warned throughout last year that weak industrial competitiveness
was hitting exports and that the main driver of growth was domestic
consumption which also showed signs of flagging at the end of the year because
of rising interest rates and inflation.
The latest data modified their short-term view against the background of a
setback for the reforming government led by President Nicolas Sarkozy in local
elections on Sunday.
Touati commented: "Certainly, the (trade) figure for January showed a
reduction in the deficit of 500 million euros in the month, to 3.4 billion
euros. Nevertheless, compared with the monthly figure of 2.0 billion euros
(deficit) only a year ago, this remains an extremely high figure."
"There is one poor consolation, the slowing of internal demand, notably
consumption, will reduce growth of our imports." He estimated that France
would have a trade deficit for the whole of 2008 of 40-45 billion euros.
The finance ministry commented: "The recovery of exports, already evident
in December, is very marked in January."
At BNP Paribas, analyst Mathieu Kaiser noted that all sectors of
manufacturing had advanced but that the trend showed a slowing of industrial
International conditions were gloomy and in France inflation was rising. "A
further easing of output growth and of gross domestic product is therefore
likely in coming months," he said.
Analyst Nicolas Bouzou at Asteres consultants said that that French
industry was proving resilient and exports to a "micro-climate" in Europe had
He expected industrial output this year to rise by 1.4 percent, in line
with possible economic growth of 1.8 percent.
At the Xerfi finance house, analyst Alexander Law said that manufacturing
had got off to a flying start this year. "A finger is often pointed at the
burden of the oil bill on the French economy. But the recycling of
petro-dollars also benefits us," he said.
"Exports to the Middle East, particularly of Airbus aircraft and of luxury
products, shot up by 17 percent in January in a month."
The latest figures overall were "paradoxical", but the economy seemed set
for growth of "only 1.4 percent" this year.