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Paris - France's economy posted no growth in the first quarter
and there are no signs of a strong recovery in activity in the coming months,
according to a Bank of France survey on Tuesday.
In its monthly report, the Bank of France indicated that the
eurozone’s second-largest economy avoided a recession, after it grew by 0.2% in
the fourth quarter.
However, it said that activity was likely to remain stable
in the coming months, a picture confirmed by soft manufacturing data on Tuesday
from the INSEE national statistics office.
The Bank of France said that its business sentiment
indicator for industry was unchanged in March at 95, a three-month low it reached
in February.
It noted that industrial activity improved, with rises in pharmaceuticals and chemicals, transport equipment and hi-tech goods.
“Forecasts suggest that activity will remain stable in the short term,” the
bank said.
Economists said that with fiscal tightening across Europe
weighing on external demand for French goods and rising domestic
unemployment likely to peak next year above 10%, it was no surprise the growth
outlook was weak.
“The figures are a little bit disappointing,” said Michel
Martinez, economist at Societe Generale in Paris, who forecasts modest 0.5%
growth in France for the year as a whole.
“They are in line with the cyclical picture of the French
economy which stalled in the fourth and the first quarter and where the
recovery will be weak,” he said.
“You cannot have a tough fiscal adjustment
over two years and expect strong growth at the same time.”
President Nicolas Sarkozy, who trails his Socialist rival in
polls ahead of next month’s crucial presidential runoff, has made cutting
France’s deficit a top priority. His government cut the deficit to 5.2% of gross domestic product (GDP)
last year, below its target of 5.7%, and has pledged to balance the budget by
2016.
The Bank of France said industrial capacity utilisation was
unchanged in March and remained below its long-term average. Order books were
close to normal levels while inventories were slightly above target.
For the services sector, meanwhile, the business sentiment
level was also unchanged at 93, while the Bank of France said activity here had
grown at a faster pace on the back of transport and engineering.
Manufacturing weak
In a separate survey, INSEE said that manufacturing output
fell by 1.2% in February after slipping a revised 0.1% in January.
For industry as a whole, output increased by 0.3%, in line
with economists’ forecasts, helped by a rise in gas and electricity consumption
amid a cold snap.
Industrial output rose a revised 0.2% in month-on-month in
January, in line with the eurozone average.
“Industrial production has been on a downward slope since
mid-2011,” wrote Fabrice Montagne, an economist at Barclays Capital.
“We will need to see stronger signs in terms of business
sentiment, demand and competitiveness before we can expect a clear upswing in
the French industrial sector,” he said.
Economists said the data confirmed the picture of an
economy in the doldrums.
“Today’s industrial production data support our forecast for
flattish GDP in the first quarter,” wrote Tullia Bucco, an economist at
Unicredit in Milan.
INSEE had also forecast last month that France’s €2 trillion
economy would post no growth in the first quarter.
For the last three months as a whole, manufacturing output
fell by 1.1%. It stood 1.6% below its level of a year earlier.
Hit by the closure of the Petit-Couronne plant, owned by
insolvent oil refiner Petroplus, refining activity plunged by 13% in February.
Purchasing managers’ index data last week showed the biggest decline in factory activity for 33 months in March, after briefly stabilising in February.
