New numbers belie government's optimism

9th September 2005, Comments 0 comments

PARIS, Sept 9 (AFP) - French industrial production contracted by 0.9 percent in July from the June figure, a disappointingly weak figure that economists said raised concerns about a widely forecast pick-up in growth in the second half of the year.

PARIS, Sept 9 (AFP) - French industrial production contracted by 0.9 percent in July from the June figure, a disappointingly weak figure that economists said raised concerns about a widely forecast pick-up in growth in the second half of the year.

Figures from French statistics institute INSEE showed industrial production fell after a 0.2 percent increase in June, and that manufactured output had fallen by 1.2 percent after growth of 0.1 percent in the previous month.

The news dampened enthusiasm generated by unemployment figures for July that had showed the jobless rate below 10 percent for the first time since October 2003.

The industrial production figures "are a bit surprising because they are lower than expected when we were anticipating a slight improvement", commented the chief economist at Insee, Michel Devilliers.

He said a public holiday during July might have had an impact on the figures and reduced output by as much as 10 percentage points, meaning "in fact that we are not at minus 0.9 percent and minus 1.2, but around about zero", he said.

Other economists were more pessimistic, citing only energy and construction as two bright spots that had increased output during the period, albeit only by 0.1 percent.

"After the poor figures for second-quarter GDP (gross domestic product) and the weakening of consumer spending, these figures certainly do not augur well," said Véronique Riches-Flores, an economist at Société Génerale.

She said the statistics lent support to the notion that France was trailing European partners such as Germany and raised the spectre of "significantly weakened growth for the second half".

French Finance Minister Thierry Breton has stressed consistently in recent times that the worst is behind the French economy and that it is heading for a period of growth in the second half of 2005.

"Industrial orders are increasing, exports are much better than they had been ... and prospects have clearly been positive since July," he said at the end of last month.

A breakdown of the statistics showed a decline in the production of consumer goods (-0.4 percent) and intermediate goods (-0.2 percent), and a drop in output in the car industry (-0.6 percent) and the agriculture and food industry (-0.2 percent).

Production of capital equipment such as machinery also fell by 0.9 percent which "confirms that after falling 1.2 percent in the second quarter, investment from companies has little chance of recovering significantly in the third quarter", according to Alexandre Bourgeois, an economist at Natexis Banques Populaires.

He said recent short-term indicators such as new orders and business confidence had given rise to hopes of industrial expansion.

"But there hasn't been any," he said, adding that the difficulties faced by French exporters were a significant factor.

For Emmanuel Ferry, an economist at at Exane brokerage, the figure were "calamitous" and illustrated the structural problems that hobble French industry.

"Industrial recession is there to see," Ferry said. "Global industrial expansion is running at about 4.0 percent at the moment. France is minus 1 percent."

Ferry said French industry was struggling with an overvalued euro, increasing energy prices, and needed more innovation. He added that French companies were underexposed in high-growth areas such as Asia and eastern Europe with few of them commanding a dominant position in key sectors.

"Industrial production should fall about 0.5 percent this year, leaving households the job of underpining weak economic growth," Ferry said.

Copyright AFP

Subject: French news

 

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