French industrial output dropped in May amid widening current account deficit, according to Insee, the national statistics agency.

French industry output

The euro zone’s second-largest economy has seen its industrial production dropping 0.4 percent, after a surge of 2.2 percent posted in April.

The contraction is, however, less than 0.8 percent anticipated by economists.

Signs of weakness in France have concerned Europe, as the second-largest economy entered a shallow recession during the first quarter.

According to Insee, French manufacturing output has gained 0.6 percent over the past three months, aided by a 5 percent increase in production of transport materials and a 8.1 percent jump in refining.

SocGen’s Views On French Industrial Production

Societe Generale in its ‘Economics’ report observes though French industrial production came out better than expected in May, the analysts maintain their view of no growth in the second quarter, as other sectors should show some contractions.

The analysts at SocGen note French industrial production in May has contracted less than anticipated at 0.4 percent, which is higher than the consensus estimates of 0.7 percent drop and SocGen’s own estimates of 0.6 percent contraction.

SocGen analysts feel May’s contraction is quite predictable in view of strong 2.2 percent month-on-month growth seen in April.

The analysts also point out that the cold weather in May has put some pressures on the energy component, which expanded strongly by 3 percent month-on-month, while the manufacturing segment contracted by 1.1 percent.

No Growth Anticipated

Societe Generale analysts, however, maintain their view of no growth for France’s second quarter, as the service and construction sectors should show some contractions, reinforcing the views of recent business surveys.

The analysts at SocGen note French HICP inflation accelerated to 0.9 percent in May on year-on-year basis, aided by stronger transport and communications price growth. They anticipate French HICP inflation to accelerate to 1.1 percent on year-on-year basis, primarily on the back of energy basis.

Citing official sources, SocGen analysts note French electricity prices would be raised by 5 percent in August this year and next year. The analysts feel the price increase is needed to finance the investment projects for renewable energies and the ageing infrastructures.

Consumer Confidence At Record Low

France’s current account deficit has widened in May, with the drop in plane sales affecting the trade deficit. French consumer confidence hit a record low in June, while the number of jobless is at a record high. These negative factors dimmed the prospects rapid recovery of France.

Recently, IceCap Asset Management Limited indicated France continues to experience slowdown as its imports continue to show declining trend besides slow collapse of its housing market.