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UPDATE 1-Subdued French growth view ups pressure on Hollande
* Bank of France forecasts 0.1 pct GDP contraction in Q3
* Industrial sector indicators points to upturn
* President aims to cut spending while restoring growth
PARIS, Sept 10 (Reuters) - A rise in French industrial output in July looks unlikely to stop the economy from shrinking in the third quarter, illustrating the challenge President Francois Hollande faces in delivering on a pledge to restore growth while cutting spending.
The central bank forecast on Monday that gross domestic product would fall 0.1 percent quarter on quarter in the three months through September, confirming an earlier estimate.
The euro zone's second-biggest economy posted zero growth in each of the previous three quarters.
The updated growth forecast coincided with early signs of an upturn in the industrial sector.
The INSEE statistics office said industrial production rose in July, increasing 0.2 percent over the month and well ahead of economists' average forecast for a fall of 0.5 percent in a Reuters poll.
The Bank of France said its monthly business sentiment indicators improved in August, with the industry sector index rising to the highest level since April.
GROWTH AND CUTS
Despite the rare ray of light from industry, Hollande has his work cut out to revive a stagnant economy within two years, as he promised to do during a prime-time television interview on Sunday.
Further complicating the task, he also aims to cut the public deficit by the most in 30 years, which is likely to weigh on growth, confidence and employment.
"The French must realise that for two years, efforts will required. They will be shared by all, but they will be considerable," said Finance Minister Pierre Moscovici on RMC radio.
"The recovery will take two years and afterwards I hope we will find ourselves ...back in a growth phase, and a phase of (wealth) redistribution."
Hollande committed himself to an economic turnaround after he was hit with criticism for acting too slowly to tackle unemployment, at a 13-year high, and doing too little to make a long-struggling industrial sector more competitive.
In rare upbeat news from the sector, the Bank of France said its sentiment indicator for industrial activity had risen to 93 in August from 90 in July, with the pharmaceutical and chemical sectors both reporting more optimism.
For the services sector, the indicator rose to 91 from 90, with a slight improvement in outlook for management consultancies and advertising.
The July upturn in industrial output was driven by an improvement in carmaking, coking and refining activities, as well as the information technology and electronics sectors.
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