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French Industrial Output Declines Less Than Forecast: Economy

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French Industrial Output Declined Less Than Forecast in May
Auto production rose 1.7 percent. Photographer: Balint Porneczi/Bloomberg

July 10 (Bloomberg) -- French industrial production fell less than economists forecast in May and Italian output rose in what European Central Bank Governing Council member Christian Noyer called “encouraging signs” of recovery.

French production declined 0.4 percent after a 2.2 percent surge in April, national statistics office Insee said in Paris today. Economists forecast a 0.8 percent decrease, according to the median of 21 estimates in a Bloomberg News survey. Italian output rose for the first time since January.

“We have seen a certain number of positive signals” in the recent data, Noyer told journalists in Paris. The recovery “still must be confirmed” and governments need to “accelerate the pace of reforms,” he said.

In France, President Francois Hollande is struggling to bolster an economy that has barely grown in more than two years, while Italy’s Prime Minister Enrico Letta is grappling with a renewed recession. The ECB promised last week to keep interest rates low for an “extended period” in the face of stalled growth and inflation below its targeted level.

French manufacturing output has gained 0.6 percent over the past three months, bolstered by a 5 percent increase in production of transport materials and a 8.1 percent jump in refining, Insee said. Today’s data indicate the economy may have grown in the second quarter after shrinking 0.2 percent in the first three months of the year, according to Unicredit MIB and BNP Paribas SA.

French Confidence

“Momentum in factory activity accelerated much more than business surveys suggested in the second quarter,” said Tullia Bucco, an economist at Unicredit in Milan. “Even assuming a further sizable correction in June, industrial production is likely to provide a solid positive contribution to second-quarter gross domestic product.”

The euro rose against the dollar and was trading at $1.2817 as of 11:29 a.m. London time, up 0.3 percent from yesterday.

The Bank of France said earlier this week that confidence among factory executives climbed to 96 in June, its highest since September 2011. The reading suggests gross domestic product rose 0.2 percent in the second quarter, it said.

In Italy, industrial production gained 0.1 percent in May after a 0.3 percent drop in April. Output remained down 4.2 percent from a year earlier, led by a 15 percent drop in refining and a 12 percent decline in mining.

Credit Rating

Italy’s credit rating was lowered yesterday to BBB, or two levels above junk, by Standard & Poor’s, which cited “worsening” economic prospects and an impaired financial system. The outlook on the rating, reduced from BBB+, remains negative, the ratings company said.

S&P said that, even after unprecedented easing by the ECB, real interest rates for non-financial companies in Italy exceed the level before the financial crisis.

The rating cut “underlines the necessity for governments to follow through and accelerate reforms and to continue without fail the push toward banking union,” Noyer said.

Elsewhere, data showed China’s exports and imports unexpectedly declined in June, underscoring the severity of the slowdown in the world’s second-biggest economy as Premier Li Keqiang reins in credit growth.

Overseas shipments fell 3.1 percent from a year earlier, the most since the global financial crisis. That compared with the median estimate of a 3.7 percent gain in a Bloomberg News survey. Imports dropped 0.7 percent, while the median projection was for a 6 percent increase.

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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