PARIS (MNI) – French economic activity is likely to remain sluggish
at the end of this year, as a slowdown in industry offsets further
growth in the services, the Bank of France forecast Monday, citing the
results of its monthly business survey.

The central bank confirmed its previous projection for a modest GDP
contraction of 0.1% in 4Q.

The latest survey signaled a “very slight” expansion in industry in
November after the contraction in October. Manufacturing capacity
utilization edged up to 76.6% from 76.3%, remaining well below average.
Order books were still below desired levels, while finished goods
inventories were about on target.

The central bank’s sector climate indicator, based on the latest
three months’ results, slipped back one point to a four-month low of 91,
whereas a few analysts had hoped from an uptick.

Manufacturers’ overall production outlook for December fell back
two points to -1, pointing to “a slight slowdown in activity,” the
central bank said.

Other leading indicators for industry point to weak activity as
well. The modest upturn in the November factory PMI (44.5) was driven
mainly by a flatter decline in foreign orders (46.1), while the output
component fell back (40.9). Surveys by the national statistics institute
Insee also show producers quite pessimistic about orders and near-term
output prospects. In November Insee forecast a 0.4% contraction in
manufacturing output in 4Q.

Factory-gate prices continued to rise slightly in November, while
those in the services stabilized, the Bank of France’s survey indicated.

The survey flagged a slight expansion in the services in November,
with gains in the high tech, hotel and food sectors offsetting temporary
work and household services. The services climate indicator was stuck at
a low 91 for the sixth month in a row.

The one bright spot was a further recovery in expected services
activity. After a four-point upturn in November, the index gained
another point to +4, suggesting “growth of activity” in December, the
central bank said.

France’s services PMI has been especially weak since August,
hovering around 45. Insee’s sector survey showed company expectations
still well below average in November.

–Paris newsroom +331 4271 5540; e-mail: ssandelius@mni-news.com

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