Industrial output is up but so is trade deficit

10th October 2006, Comments 0 comments

PARIS, Oct 10, 2006 (AFP) - French industrial output recovered in August but a sharp widening in the trade deficit, which could be further eroded by the crisis at Airbus, cast a shadow over the country's economic recovery, official data revealed Tuesday.

PARIS, Oct 10, 2006 (AFP) - French industrial output recovered in August but a sharp widening in the trade deficit, which could be further eroded by the crisis at Airbus, cast a shadow over the country's economic recovery, official data revealed Tuesday.

Industrial production rose 0.8 percent in August after a slide of 1.4 percent in July, led by a rebound in the automobile sector where output jumped 3.6 percent after two months of steep declines, according to the statistics institute INSEE.

A darker picture emerged however in the trade sector, with the deficit growing 3.8 percent to EUR 3.535 billion from a revised shortfall of 3.403 billion euros in July.

In the 12 months to August 31 the deficit widened 3.6 percent to EUR 27,891 billion compared with the year to July 31, highlighting structural weaknesses in the French economy.

The deteriorating trade picture in August cannot be attributed to high energy costs, said analyst Alexander Law with the research group Xerfi, who noted that "the deficit in the energy sector decreased by more than 200 million euros".

Law said that despite a pickup in industrial activity in August the rise over one year "comes to only 0.9 percent, whereas in Germany this same indicator exceeds seven percent."

At financial research firm Asteres, Nicolas Bouzou, pointed to a steep fall in capital equipment production, down 1.8 percent, which he said signals "a weakening in investment by French companies."

Economists have warned that the pressures weighing on French economic momentum risk intensifying in the months ahead because of the production and management crisis at Airbus, as the manufacturer struggles to overcome major delays to its critical A380 superjumbo program.

"In the capital goods sector, activity has been dampened by sub-standard performances in the maritime and aeronautics sectors," which is worrisome for the future "given the importance of Airbus to French industry and foreign trade," Law said.

Added Bouzou: "The difficulties that Airbus is encountering are not neutral for the French economy.

"The capital goods sector, which until now was the single solid prop for French industry, seems to have started in on a downward phase."

Analyst Marc Touati of Natexis Banques Populaires said Airbus exports should help the country "limit the damage" in the trade sector. But he added: "If they were not there, the deficit would increase by about EUR 10 billion."

Economists predict rough sledding for the French economy in general over the next several quarters and that if growth does come to 2.3 percent this year, as INSEE has forecast, 2007 will pose fresh hurdles.

Copyright AFP

Subject: French news

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