–Adds Results of Quarterly Supplement In Final Paragraphs

PARIS (MNI) – French economic activity slowed somewhat in February
and near-term prospects point to moderate growth ahead, the Bank of
France said Friday, citing the results of its monthly business survey.

As a result, the central bank trimmed its projection from last
month for GDP growth in 1Q by 0.1 point to 0.7% — still a marked
pick-up from the gain of 0.4% in 4Q.

On Thursday the national statistics Institute Insee revised up its
estimate of 1Q GDP growth to 0.6% from 0.3% expected in December.

Prices continued to rise in both industry and the services in
March, the Bank of France noted.

Its survey suggests that industry output expanded in all main
sectors in March except for autos and clothing and textiles. Gains were
led by machinery and equipment and the agri-food sector. Capacity
utilization rose 0.3 point to nearly three-year high of 80.6% — less
than two points below the long-term average.

The bank’s sector climate indictor, based on the latest three
months’ results, was unchanged again in March at 110 for the third month
in a row. Most analysts had also expected little change on the month but
were split on the direction.

However, producers’ assessment of total orders declined further in
March, down four points from February and 14 points below the recent
peak in January. This points to slower growth in the medium term. Their
view of back orders was unchanged on the month. “Order books remained at
a high level,” the central bank said.

Production expectations by sector suggest that the slowdown will be
concentrated in high-tech and optics sector. Most other branches could
see a pick-up or, in the case of the car industry, a modest recovery in
the near term.

Growth in the services also lost more steam in March; the activity
indicator declined three points after a four-point downturn in February.
Still, the three-month activity indicator rose one point to a three-year
high of 103. Activity in March was driven by temporary work and IT
services, the central bank said.

A marginal pick-up in services activity is foreseen in April.
Expectations point to sustained or more dynamic growth in all branches
except for transportation, car repairs and administrative services.

The survey’s quarterly supplement showed that the cash positions of
industry firms improved further to above pre-crisis levels. Investment
spending increased in 1Q and is expected to continue rising, but at a
slightly slower pace. Profit margins narrowed slightly, while gross
operating profits were overall unchanged.

Construction activity recovered in 1Q, with gains in both building
and civil engineering. Order books increased significantly. Forecasts
point to more moderate growth in the near term.

Wholesalers reported a sharp rebound in purchases in 1Q and a
marked recovery in sales. With order books at levels last seen in 2007,
turnover is expected to remain dynamic ahead. Wholesalers said purchase
prices and sales prices eased slightly from the multi-year highs reached
in 4Q.

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

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