PARIS (MNI) – French economic activity is likely to stagnate in the
services in the near term and recover only slightly in industry, the
Bank of France said Tuesday, citing the results of its monthly business
survey.

The central bank confirmed its projection for no GDP growth at all
in 4Q. The national statistics Institute Insee has forecast a
contraction of 0.2%.

The Bank of France’s survey indicated that industry output expanded
“very slightly” in December, but capacity utilization retreated
marginally from 79.2% to 79.1% — more than two points below the
long-term average.

The central bank’s sector climate indicator, based on the latest
three months’ results, regained the one point shed in November to return
to 96, but that was still down 14 points from the recent high in March.
Most analysts surveyed had expected no change or a further decline.

Order books were somewhat thinner as new demand declined. Finished
goods stocks were assessed close to targeted levels.

Firms’ outlook for overall production in January rose one point to
+3, which the central bank interpreted as a sign of a modest pick-up in
the short term.

In past months, the survey’s signals have been less dismal than the
factory PMIs, but the gap has narrowed with the upturn in the latter in
December to 48.9 from 47.3 in November, reflecting a slower decline in
output (49.1) and new orders (46.9).

France’s services sector, which far outweighs industry as a share
of activity, has also regained some steam on the back of a rebound in IT
services and temporary work, the central bank said. Staffing and prices
rose somewhat.

However, the outlook for services activity in January fell four
points, reversing the gain in December. “Forecasts suggest that service
sector activity should remain at its current level in the coming
months,” the BoF commented.

The services climate indicator was unchanged at 95 for the fourth
month in row, down eight points since March to the level last seen in
August 2010.

The services PMI suggested that activity stabilized in December
(50.3) after a marked recovery in November. The decline in new business
was interrupted as well (50.2).

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

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