Mood:
chattyTopic: Lib Loser Stories
French Industrial Output Declined for a Third Month
French industrial production fell for a third month in April, led by a drop in energy output, adding to signs growth is slowing.
Production at French factories, utilities and mines in Europe's third-largest economy, declined 0.3 percent from March, when it slipped a revised 0.3 percent, statistics office Insee said today in Paris. Economists had predicted a 0.1 percent drop, according to the median of 20 forecasts in a Bloomberg survey.
A 23 percent increase in oil prices this year and the highest unemployment rate since 1999 are curbing demand. French manufacturers last month grew the most pessimistic in 19 months, and consumer confidence fell. A slowdown in Europe is crimping profits at companies such as drinksmaker Remy Cointreau SA.
"Manufacturing output isn't exactly buoyant in France," said Hugues de Montvalon, chief economist at Oddo et Cie. in Paris. "The question is whether it will stay like that over coming months."
The euro dropped to $1.2219 after the report, trading as low as $1.2215 from $1.2229 yesterday.
Output was unchanged from a year earlier and March's number was revised higher from a previously reported drop of 0.5 percent. The three months of falling industrial production was the longest stretch of declines in more than 2 1/2 years.
Manufacturing output rose 0.5 percent in April after a 0.7 percent drop in the previous month, today's report showed. From a year earlier, it rose 0.1 percent.
Slowing Growth
France's economy, which contributed the most to euro region growth last year, expanded at a weaker-than-expected 0.2 percent in the first quarter from the previous three months. In the year, the economy may struggle to reach the 2 percent growth predicted by the European Commission on April 4, said Marc Touati, chief economist at Natexis Banques Populaires in Paris.
"French industry is on its way to recession," Touati said. "For next year we can be slightly more optimistic than for this with growth around 2 percent, but probably not more."
Companies have been reluctant to step up hiring with oil prices above $50 a barrel threatening to erode their earnings through higher raw material costs and amid slowing global demand. French unemployment was unchanged in April, leaving the jobless rate at a five-year high of 10.2 percent.
The Organization for Economic Cooperation and Development on May 24 cut its estimate for expansion among its 30 member states this year to 2.6 percent from 2.9 percent, citing a deepening slowdown in Europe and rising energy costs.
The Paris-based organization, which doesn't include countries such as China and Brazil, expects the U.S. to grow 3.6 percent this year, three times faster than the pace predicted for the euro region.
Energy Drop
The drop in France's April production was led by a 4.9 percent decline in energy. French power output slipped 9.7 percent in April from March, according to Reseau de Transport d'Electricite's Web site.
"The outlook in the short term is fairly bleak," said Elwin de Groot, an economist at Fortis Bank Nederland NV in Amsterdam. "We shouldn't expect too much in the coming months."
Schneider Electric SA, the world's largest maker of circuit breakers, said June 3 that it will eliminate 280 jobs in France as it boosts production in lower-cost, faster-growing regions. The company used to generate 60 percent of its costs in Europe and 40 percent of its sales.
Europe 'Concern'
"We haven't felt an improvement and Europe remains a very strong point of concern to us because it's a zone that's important in our selling portfolio," Jean-Pascal Tricoire, chief operating officer of Schneider Electric said in an interview last week.
Remy Cointreau, the maker of Piper Heidsieck champagne, said annual profit fell 68 percent after it wrote down the value of some brands as European demand slumped.
A 9.6 percent decline in the euro against the dollar this year may help European producers by making exports more affordable abroad. The euro touched a record $1.3666 on Dec. 30.
In April, French production of cars rose 0.7 percent after a 1.4 percent drop in the previous month, today's report showed. Output of consumer goods, including pharmaceuticals, advanced 0.7 percent, and production of capital goods such as planes and machines increased 0.6 percent.
So far this year, industries across Europe are showing mixed signals. In Germany, industrial output rose for the first month in three in April, the Economy and Labor Ministry in Berlin said June 7, while Italian industrial production probably fell 0.6 percent in May, according to a survey of estimates conducted by employers' association Confindustria in Rome released June 8. Italy is scheduled to release industrial production on June 14.
Rate Outlook
To help spur growth and stimulate demand, politicians including Italian Prime Minister Silvio Berlusconi as well as the OECD have urged the European Central Bank to lower borrowing costs. The ECB has held its benchmark interest rate at a six- decade low of 2 percent since June 2003.
Interest rate futures trading shows investors have reversed expectations for a rate increase and some are now betting on a reduction later this year.
The implied rate on the December Euribor futures contract was at 2.02 percent today from 2.61 percent at the start of the year. The contracts settle to the three-month euro area inter-bank offered rate, which has averaged 15 basis points more than the ECB's main rate since the euro's start in 1999.
For now, ECB President Jean-Claude Trichet is showing no signs of heeding such calls, calling rates this week "appropriate," a word policy makers have used in the past to signal they have no intention to change credit costs.
Bloomberg ~ Simone Meier ** French Industrial Output Declined for a Third Month
