By Daniel Flynn
PARIS, April 10 France's economy posted no
growth in the first quarter and there are no signs of a strong
recovery in activity in the coming months, according to a Bank
of France survey on Tuesday.
In its monthly report, the Bank of France indicated that the
euro zone's second largest economy avoided a recession, after it
grew by 0.2 percent in the fourth quarter.
However, it said that activity was likely to remain stable
in the coming months, a picture confirmed by soft manufacturing
data on Tuesday from the INSEE national statistics office.
The Bank of France said that its business sentiment
indicator for industry was unchanged in March at 95, a 3-month
low it reached in February.
It noted that industrial activity improved, with rises in
pharmaceuticals and chemicals, transport equipment and hi-tech
goods. "Forecasts suggest that activity will remain stable in
the short term," the bank said.
Economists said that w ith fiscal tightening across Europe
weighing on external demand for French goods and w ith r ising
domestic unemployment likely to peak next year above 10 percent,
it was no surprise the growth outlook was weak.
"The figures are a little bit disappointing," said Michel
Martinez, economist at Societe Generale in Paris, who forecasts
modest 0.5 percent growth in France for the year as a whole.
"They are in line with the cyclical picture of the French
economy which stalled in the fourth- and the first-quarter and
where the recovery will be weak," he said. "You cannot have a
tough fiscal adjustment over two years and expect strong growth
at the same time."
President Nicolas Sarkozy, who trails his Socialist rival in
polls ahead of next month's crucial presidential runoff, has
made cutting France's deficit a top priority. His government cut
the deficit to 5.2 percent of GDP last year, below its target of
5.7 percent, and has pledged to balance the budget by 2016.
The Bank of France said industrial capacity utilization was
unchanged in March and remained below its long-term average.
Order books were close to normal levels while inventories were
slightly above target.
For the services sector, meanwhile, the business sentiment
level was also unchanged at 93, while the Bank of France said
activity here had grown at a faster pace on the back of
transport and engineering.
In a separate survey, INSEE said that manufacturing output
fell by 1.2 percent in February after slipping a revised 0.1
percent in January.
For industry as a whole, output increased by 0.3 percent, in
line with economists' forecasts, helped by a rise in gas and
electricity consumption amid a cold snap.
Industrial output rose a revised 0.2 percent in
month-on-month in January, in line with the euro zone average.
"Industrial production has been on a downward slope since
mid-2011," wrote Fabrice Montagne, an economist at Barclays
"We will need to see stronger signs in terms of business
sentiment, demand and competitiveness before we can expect a
clear upswing in the French industrial sector," he said.
Economists said that the data confirmed the picture of an
economy in the doldrums.
"Today's industrial production data support our forecast for
flattish GDP in the first quarter," wrote Tullia Bucco, an
economist at Unicredit in Milan.
INSEE had also forecast last month that France's 2 trillion
euro economy would post no growth in the first quarter.
For the last three months as a whole, manufacturing output
fell by 1.1 percent. It stood 1.6 percent below its level of a
Hit by the closure of the Petit-Couronne plant, owned by
insolvent oil refiner Petroplus, refining activity plunged by 13
percent in February.
The Purchasing Managers' index (PMI) data last week showed
the biggest decline in factory activity for 33 months in March,
after briefly stabilizing in February.