April 10, 2012

French Factory Output Keeps Business Confidence Low

Bank of France predicts no production growth for 1Q

Factory output in France fell for the third month in a row in February, and the gloom that descended on factory executives in that month was unchanged for March, according to the Bank of France.

Bloomberg reported that INSEE, the French national statistics office, unveiled statistics that revealed a third monthly drop in manufacturing production. Economists surveyed by Bloomberg had expected production to remain unchanged, but instead it fell by 1.2%.

While France avoided a recession, according to the bank, having grown by 0.2% in the fourth quarter of 2011, Reuters reported that it foresaw no signs of a strong recovery in the months to come, saying, "Forecasts suggest that activity will remain stable in the short term." The bank’s industry business sentiment indicator remained at 95 in March—unchanged from February, when it hit a 3-month low.

The Bank of France also said that, according to its survey data, gross domestic production most likely did not expand in the first quarter. France, which has the second largest economy in Europe, is struggling economically under the euro zone debt crisis, and that is expected to play a major role in its upcoming elections.

President Nicolas Sarkozy is hoping to win out over his Socialist challenger Francois Hollande, who has been campaigning against Sarkozy’s policies. The first round of balloting will take place on April 22, and voters will choose among 10 candidates. The two top contenders to emerge from that vote will face each other on May 6.

"The figures are a little bit disappointing," Michel Martinez, an economist at Societe Generale SA in Paris, said in the Reuters report. "They are in line with the cyclical picture of the French economy, which stalled in the fourth and the first quarter and where the recovery will be weak. You cannot have a tough fiscal adjustment over two years and expect strong growth at the same time."

He added, “The general message is this: the French economy is practically stalled. France doesn’t have the problems of its southern neighbors but its industry remains in recession and we remain very far from a classic recovery scenario.”

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