French industrial drops in sign of GDP contraction

French industrial output stagnated in June, the latest sign that the euro area’s second-largest economy may be heading for its first recession in three years. Output was unchanged from May, Paris-based statistics office Insee said in an e-mailed statement. Economists had forecast an increase of 0.1 per cent in June, according to the median of 20 estimates gathered by Bloomberg News. The lack of growth underlines both France’s faltering short-term growth prospects and a decade-long loss in its share of export markets that’s leading companies from PSA Peugeot Citroen SA (UG) to Alcatel Lucent SA to cut jobs. The Bank of France said on Aug. 8 that confidence among factory executives is at a three-year low, indicating the economy may contract in both the second and third quarters. “Overall production may be declining, though not precipitously,” said Fabrice Montagne, an economist at Barclays in Paris. “It reflects the situation in external trade, with weak demand in many countries, notably Italy.” With Spain, Italy and the UK already in recessions, France’s exports to other European Union countries fell 0.5 per cent in the first half of 2012, the French customs office said on Aug. 8. In France, manufacturing output, which excluded power generation, advanced 0.1 percent in June, though it fell 1.2 per cent in the second quarter, Insee said. Sentiment among French factory executives fell to 90 in July, the lowest since August 2009, from 91 in June, according to the Bank of France survey published two days ago. Executives reported a drop in output at car and textile factories. Factory use fell, order books shrank and inventories climbed, the survey showed. Insee publishes its first estimate of second-quarter gross domestic product on Aug.14. Meanwhile, French President Francois Hollande’s approval rating has dipped to 46 per cent three months after winning office, pollster Ifop said late on Saturday, suggesting a weak economy had cut short the Socialist leader’s honeymoon period. The survey showed Hollande -who won office on May 6 with nearly 52 per cent of votes -had not benefited from the post-electoral bounce enjoyed by his predecessor Nicolas Sarkozy in 2007. Sarkozy’s approval rating climbed to 65 per cent in the weeks after his victory. However, Hollande took office amid gloomier economic prospects, with unemployment at a 13-year high of 10 per cent and France expected to slip into recession this year. The Ifop poll, published in right-leaning newspaper Le Figaro, said that 51 per cent of those questioned thought France was changing for the worse, with just 17 per cent convinced it was changing for the better. In 2007 after the election of Sarkozy, 45 per cent of those questioned said France was changing for the better. “In this very pessimistic climate and with regard to the very small room for manoeuvre which exists, the confidence ratings for Hollande and his government are consistently below 50 per cent,” said Jerome Fourquet of Ifop. Hollande has insisted his government will meet France’s deficit targets of 4.6 per cent of GDP this year, obliging him to unveil a 7.2 billion euro package of tax rises, mostly on wealthy households and large corporations.