March 11, 2013 / 10:01 AM / 5 years ago

French January industrial output drops, base year change weighs

PARIS, March 11 (Reuters) - French industrial output slid 1.2 percent in January, dragged down by weak auto and agri-food production but also by a change in the base year used for the data.

It was the latest gloomy news for an economy struggling to avoid recession.

The 1.2 percent monthly drop, the sharpest fall since September, was much worse than a forecast for a flat reading. It was affected by the change in the base year used by the INSEE statistics office and by a new weighting of the indices.

One impact of the new calculation method is to amplify variations, an INSEE official said. With the previous method, industrial output was down only 0.1 percent in December - it is now registered as 0.9 percent higher.

Car making dropped by 13.5 percent in January, following a revised 8.8 percent increase in December. The previous December reading was a 4.5 percent increase.

Analysts said the drop in overall output was nevertheless a further sign that France’s 2-trillion-euro economy could slip into recession after contracting 0.3 percent in the final quarter of 2012 and following a series of weak data this year.

The data also shows the extent of the challenge facing the government, which has vowed to reverse years of industrial decline in a country where industrial production accounts for about 12 percent of economic activity

“The weak report is consistent with France’s depressed business confidence surveys. Because of the lack of improvement in the latter, we think industrial output is likely to remain lacklustre,” said Helene Baudchon, economist at BNP Paribas.

“This is consistent with our expectation of another French GDP contraction in Q1.”

Looking back three months, the drop in industrial output was even bigger, with production over the November to January period down 4.6 percent from the same period a year ago.

“Since Q1/11 the downward trend is really worrying. Not a good start for 2013,” Philippe Waechter, chief economist at Natixis Asset Management, wrote in a tweet.

German industrial output was unchanged in January, undercutting expectations for a slight rise and compounding concerns that the euro zone’s largest economy might not rebound as strongly as expected from a contraction in the last quarter of 2012.

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