French Industrial Production Rebounds on Cars, Aircraft: Economy
French industrial output rose more than economists forecast in February as production from car and aircraft factories increased and a refinery restarted.
Production climbed 0.7 percent after a revised 0.8 percent decline in January, national statistics office Insee said in Paris today. Economists forecast a 0.2 percent increase, according to the median of 26 estimates in a Bloomberg News survey. Separate data showed production fell in both Italy and Spain in February.
France’s economy remains under pressure from a domestic budget squeeze and weak euro-area demand at a time when President Francois Hollande is trying to revive economic growth and facing calls from his own ministers to ease austerity. At the same time, business confidence is weakening as Europe’s second-largest economy teeters on the brink of its third recession in four years.
“This isn’t the beginning of the recovery,” said Bruno Cavalier, chief economist at Oddo & Cie in Paris. “Confidence is dropping, even more so in services than industry. France is in recession and will stay there for at least several more months.”
Today’s report showed that French industrial production was down 2.5 percent from a year earlier. In the quarter through February, manufacturing output, which excludes refineries, utilities and mines, fell 0.3 percent from the previous three months and declined 1.9 percent on the year.
Julien Manceaux, an economist at ING Bank NV in Brussels, said there is “little reason to cheer.”
“It is clear that if confidence does not increase faster, even a zero percent growth rate will be a challenging target for the French economy in 2013,” he said in a note today.
The euro rose 0.1 percent against the dollar today and was trading at $1.3099 as of 11:19 a.m. London time.
Separately today, Spanish industrial output declined more than economists forecast in February as Prime Minister Mariano Rajoy struggles to haul the economy out of a six-year slump. Production at factories, refineries and mines adjusted for the number of working days fell 6.5 percent from a year earlier, after declining 4.9 percent in January. That compared with the median estimate of a 4.9 percent drop in a Bloomberg survey.
Like Hollande, Rajoy is seeking more time from the European Union to cut his budget deficit on concern that the recession may worsen under the weight of the government’s budget squeeze. Economy Minister Luis de Guindos estimated yesterday that output shrank between 0.5 percent and 0.6 percent in the first quarter.
In Italy, industrial output also fell more than forecast in February, signalling the country may still be mired in its longest recession in two decades. The 0.8 percent drop followed at 1 percent increase the previous month.
The Italian data showed that capital goods production fell 2.3 percent. Annalisa Piazza, an analyst at Newedge Group in London, said this indicates that companies are “skeptical in revising their investments as prospects for activity remain extremely bleak in the remainder of the year.”
“We expect industrial activity to remain a drag for growth at least in the first half of 2013,” she said.
Sweden’s industrial orders grew for the first time in more than a year in February as production fell less than predicted, data today showed. Orders rose 2.1 percent from a year earlier after declining a revised 5.7 percent the previous month. Output fell an annual 0.9 percent, less than the 1.9 percent forecast by economists.
In France, confidence among manufacturing executives fell to 93 in March from 95 in February, according to yesterday’s Bank of France report. Services sentiment slipped to 88 from 89 as companies reported declining demand and prices.
With joblessness surging after the economy shrunk in the fourth quarter, Hollande is trying to balance European Commission demands for deficit reduction against a slump in the polls and demands to ease austerity. Industry Minister Arnaud Montebourg was joined by Consumer Minister Benoit Hamon today in calls for Hollande to focus more on growth than fiscal austerity.
“We’ll probably have a second quarterly contraction with external trade contributing negatively,” said Michel Martinez, an economist at Societe Generale SA in Paris. “France is less open to exports than many countries and the problem is that exports won’t necessarily drive this year’s recovery.”
Shipments abroad increased 10 percent in March from a year earlier, the customs administration said, while imports rose 14.1 percent, leaving an unexpected trade deficit of $880 million. Researcher IHS Inc. (IHS) said an “astounding” 92.9 percent jump in exports to Hong Kong, the most in 18 years, raises questions on data quality. The customs agency acknowledged concerns at a press briefing that the data may be overstated, while standing by its figures.
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