Industrial production dropped 0.1% on a monthly basis in December, reversing a revised 0.6% rise in November, statistical office Insee said Wednesday. Economists had forecast a 0.5% increase. Compared to the previous year, there was a decline of 2.3% in December, faster than the 3.8% drop in the previous month.
"Firms may still be struggling to gauge sustainable production levels as the impact of the various European schemes starts to wane," said Colin Ellis, European economist at Daiwa Capital Markets Europe.
The statistical agency reported that manufacturing production fell 0.8% month-on-month in December after a downwardly revised increase of 0.8% in November. Economists had forecast an increase of 0.2%. On an annual basis, manufacturing output fell 2% in December, slower than the 3.2% decline in November. In the fourth quarter, industrial and manufacturing output grew 0.1% each sequentially.
Given the strong rise in new orders at the beginning of this year, France's manufacturing recovery is expected to continue in the coming months. The purchasing managers' index for the French manufacturing sector showed that growth in manufacturing activity accelerated in January as new orders increased at the steepest pace since November 2006. Moreover, the manufacturing PMI for the euro area hit a two-year high in January, led by France and Germany.
According to BNP Paribas economist Frédérique Cerisier, the underlying trend of French industrial recovery is moderate and the effective increase in output is likely to be jerky, not least due to the inventory cycle. The economist sees further rise in industrial output, but expects the stabilization in the fourth quarter of 2009 to have weighed on GDP growth.
The French economy grew 0.3% sequentially in the third quarter after exiting recession in the second quarter. Insee is due to release fourth quarter national account preliminary estimates on Friday. The Bank of France forecasts the economy to grow 0.5% in the fourth quarter.
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