PARIS (MNI) – French economic activity picked up slightly in
October both in industry and services, and near-term prospects point to
somewhat stronger growth through the end of this year, the Bank of
France said Tuesday, citing the results of its monthly business survey.

After an expected slowdown in 3Q, quarterly GDP growth should
accelerate in 4Q to 0.5%, the central bank predicted.

Last month, the Bank of France estimated 3Q growth at 0.3%. Most
analysts now expect 3Q GDP to rise at least 0.5%. Preliminary data will
be released Friday. Last month the national statistics institute Insee
forecast growth of 0.4% in both 3Q and 4Q.

The Bank of France’s survey suggested that industry output expanded
in all main sectors in October except for clothing, pharmaceuticals and
some semi-finished goods branches. However, capacity utilization slipped
0.4 point to 76.4% — nearly six points below the long-term average —
after a 2.4-point rebound in September.

Contrary to most analysts’ forecasts, the bank’s sector climate
indictor, based on the latest three months’ results, gained another
point in October to 103, the highest level since March 2008. The
long-term average is 100.

Industry orders “continued to strengthen at a pace similar to that
seen in previous months,” the central bank said, while finished goods
inventories declined “slightly.”

“Forecasts point to an improvement in output growth in coming
months,” it said.

Growth in the services also accelerated slightly, though mainly
reflecting temporary employment activity, which also benefits industry
to a large extent. This was not enough to lift the sector climate index,
which stabilized at September’s upwardly revised level of 96.

Still, as the services production outlook for November rebounded by
five points, the central bank forecast “ongoing strong growth in the
short term.”

The results of the bank’s October retail survey are to be released
next Tuesday.

Insee’s latest sentiment surveys also signaled a recovery in
business prospects in all key sectors. Firms’ expectations are well
above long-term averages in manufacturing and retail and close to
average in the services and construction.

By contrast, the October PMI polls pointed to slower growth in both
manufacturing and the services. Growth in new orders also slowed
considerably in the services, while picking up slightly in
manufacturing.

While the recovery remains on track, the slowdown in demand growth
in the Eurozone, Asia and the US, in addition to domestic fiscal
tightening, will weigh on activity in the coming months.

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

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