French industrial production shrinks again in June
PARIS (AP) — French industrial production continued to decline in June, widening the economic gap with Europe’s largest economy, Germany, and raising concerns about its ability to emerge from recession.
France’s national statistical agency, INSEE, said in a statement Friday that industrial production shrank 1.4 percent from a month earlier. That followed a 0.3 percent monthly drop in May. Within manufacturing, steep declines were recorded in the food and car industries.
France’s figures stand in stark contrast to Germany, where industrial production grew 2.4 percent in June.
This is bad news for French President Francois Hollande. He’s promised to reverse the rise in unemployment by the end of the year, but that is looking increasingly unlikely. Unemployment hit 10.8 percent in the first quarter, and some economists say it won’t peak until at least next year.
The government sought to gloss over the June performance, with Finance Minister Pierre Moscovici saying he’s “delighted at the favorable evolution.” He pointed out that for the second quarter as a whole, manufacturing production was up 1.5 percent.
The International Monetary Fund this week called on Hollande’s government to accelerate economic reforms, saying the rigid labor market, high taxes and inefficient public spending are dragging down the economy.
There are concerns a recovery may not get traction. France’s economy is now officially in recession again, after gross domestic product shrank 0.2 percent in the first quarter.
INSEE will release its first estimate of second-quarter GDP on Aug. 14. The French government expects a 0.2 percent rise in growth during the quarter, bringing the country out of recession. But some independent analysts expect a flat reading and, after Friday’s figures, the risk is GDP will undershoot expectations.
France’s weak economy has raised concerns even in the U.S. Earlier this week, Dallas Federal Reserve President Richard Fisher said in an interview with German newspaper Handelsblatt that he was worried about the country, saying the financial risks there shouldn’t be under estimated.