PARIS (MNI) – French economic activity contracted slightly in 2Q
and is unlikely to recover in the near term, the Bank of France
estimated Monday, citing the results of its monthly business survey.

The central bank confirmed its previous projection for a 0.1% GDP
dip in 2Q. Last month, the national statistics Institute Insee had hoped
for another quarter of stability, banking on a pick-up in investment to
offset a downturn in private consumption.

The central bank’s latest survey indicated that industry output was
“overall stable in June, the decline in the automotive sector being just
about offset by an improvement mostly in the pharmaceutical sector and
in the agri-food industry.”

Sector capacity utilization recovered from 76.8% in May to 77.3%
but was still well below average. Finished goods inventories rose and
order books contracted further. Prices were little changed.

After a one-point downward revision for May, the central bank’s
sector climate indicator, based on the latest three months’ results,
slipped another point to 91, the lowest level in nearly three years.

Manufacturers’ overall production outlook for July slipped back two
points to zero, pointing to “stability” in the short term, the central
bank said.

Other leading indicators for industry also point to weak activity
ahead. Insee’s index of own-company expectations is far below normal and
the factory PMI remains deep in contraction territory, up just a half
point (45.2) from the three-year low in May, with new orders even weaker
(43.0).

France’s services sector contracted slightly in June in the face of
waning demand, despite a reduction in fees charged, the BoF survey
showed. Sector payrolls were overall stable. The services climate index
dropped two points to a 29-month low of 90.

The outlook for services activity in July was overall unchanged at
-1. With expectations across branches quite mixed, the central bank
signaled “uncertainty” over prospects for the months ahead.

France’s services PMI bounced back 2.8 points in June (47.9) from a
seven-month low, but continued to signal shrinking activity and new
business (46.8). Insee’s sector survey showed a further marked decline
in company expectations in June.

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

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