Manufacturing Improvements are Good Omen for French Economy

Analysts have attributed France's recovering factory output to greater demand for exports Photo: www.flickr.com/photos/tomsaint

Analysts have attributed France’s recovering factory output to greater demand for exports
Photo: http://www.flickr.com/photos/tomsaint

French manufacturing output for July shrank at the slowest rate in the last 17 months, in what some analysts are taking as a sign that the worst of France’s recession is over.

According to financial information company Markit, France’s purchasing managers’ index (PMI)—a measure of factory activity that factors in output, hiring, and other economic activities—rose to 49.7 from 48.4 in June, lying just below the 50-point threshold demarcating industrial contraction and growth.

The unadjusted raw output index topped 50 points, hitting a 25-month high of 51.3, and the statistics on new orders were the best France has posted since February 2012.

While the PMI still indicates that French manufacturing is contracting, the numbers for July were markedly better than what analysts had projected, indicating that France may be shaking off its recent economic woes.

“The sector was boosted by a rise in export orders, which partly compensated for still-subdued domestic demand, Markit economist Jack Kennedy said.

This encouraging piece of news closely follows a grim International Monetary Fund diagnostic report warning that the recovery of the French economy is likely to be a jobless one. The IMF’s analysis expects unemployment in France, currently estimated at just over 10%, to rise to 11.6% in 2014.

The IMF predicted that French unemployment will not fall until 2015, and, even then, it is expected to stay at 11.4%.

An improvement in manufacturing, despite weak domestic spending, suggests a jobless recovery may indeed be in store for France. While manufacturing may benefit from heightened global demand, the services sector will likely keep suffering if overall consumer confidence stays low.

France entered a recession after its gross domestic product fell in the last quarter of 2012 — a trend that continued through the first quarter of the current year. A major recession in Europe’s second largest economy would have put another strain on the already struggling Eurozone.

Trackbacks

  1. […] French manufacturing output for July shrank at the slowest rate in the last 17 months, in what some analysts are taking as a sign that the worst of the recession is over. While the PMI still indicates that French manufacturing is contracting, the numbers for July were markedly better than what analysts had projected, indicating that France may be shaking off its recent economic woes. […]

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