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09/05/2008Sharp fall in French industrial output

Industrial output fell by 0.8 percent in March and indicates darkening gloom for the economy.

9 May 2008

PARIS - French industrial production fell sharply in March, particularly in the auto sector, official data showed on Friday and analysts said the figures pointed to deepening gloom for the economy.

Industrial output fell by 0.8 percent in March from the figure for February which had shown a rise of 0.3 percent.

But auto industry production slumped 2.9 percent, after falling by 2.1 percent in February.

Manufacturing output, excluding energy, agriculture and food processing, fell by 1.5 percent in March after a revised rise of 0.5 percent in February.

Analysts said the data fitted a picture of darkening gloom for the French, and to some extent eurozone, economies despite assurances on growth by the European Central Bank which is focusing on fighting inflation.

The figures and analysis highlight strains for the right-wing government overseen by President Nicolas Sarkozy, one year in office after winning power with promises of radical reforms to boost growth and buying power, and to cut budget overspending.

But since then France has been hit by global rises in oil and food prices. The euro has also risen to record high points against the dollar. This is an extra problem for exporters, although it helps to contain the cost of importing fuel.
 
Production of consumer goods, the main driver of French growth in the last two years, fell by 0.8 percent, the output of investment goods fell by 1.1 percent, and production of semi-finished goods fell by 1.7 percent, the latest data showed.

Production of energy rose by 2.4 percent but output by the food and agriculture industries fell by 0.6 percent.

At BNP Paribas bank, analyst Mathieu Kaiser commented that the data showed a "heavy fall" and an even "more brutal" decline of manufactured output, "the heart" of overall industrial production.

The figures for the last three months showed a 12-month rise of about 2.0 percent but this was solely because of performance in January and February. "The month of March seems to mark a turning point for industrial activity," he said. "All sectors of manufacturing weakened."

Kaiser commented that the data was "coherent with bad results registered in March on the internal front and abroad." He was referring to a 1.7-percent fall in household spending and a 6.0-percernt fall in the value of exports.

"They feed into a more general turning point for European activity as seen since the beginning of the year."

The March data suggested that an expected slowing of the French economy would arrive in the second quarter and would last for much of the year, he said.
 
At Global equities, economist Marc Touati said: "The French economy is in the process of going from autumn to winter."

The data showed that difficulties for the French auto industry were worsening, and the figures for investment and semi-finished goods "confirm that investment by companies is likely to slow down sharply in coming quarters."

Production of consumer goods, after six flaccid months, had also fallen by 0.8 percent and by 0.6 percent on a 12-month basis, showing that a fall of household consumption was "likely to continue, even intensify".

Overall economic activity in France was likely to worsen, and growth of gross domestic product would remain weak throughout the year at an average of 1.4 percent, he said.

This outlook was in contrast to the view of the European Central Bank which, looking at past performance, held that growth remained resilient in the eurozone.
 
Given that any easing of monetary policy took six to nine months to affect activity "when the euroland monetary policymakers realise the extent of the damage, it will be clearly too late," Touati said.

[AFP / Expatica]


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