PARIS (MNI) – French economic activity is likely to remain on a
downward slope in the months ahead, the Bank of France forecast Monday,
citing the results of its monthly business survey.

The central bank confirmed its projection for a modest GDP
contraction of 0.1% in 3Q. Since 4Q of last year, activity has been flat
overall.

The latest survey showed industry executives “slightly more
favorable” about activity in August, especially in the pharmaceutical
and chemical sectors. Indeed, the central bank’s sector climate
indicator, based on the latest three months’ results, rebounded three
points to a four-month high of 93, though still seven points below
average. Most analysts had expected little change but were split on the
direction.

However, manufacturing capacity utilization remained well below
average in August at 77.0%, unchanged from July. Order books contracted
further and finished goods inventors were slightly lower. Prices were
boosted somewhat by costlier commodities.

Manufacturers’ overall production outlook for September fell into
negative territory at -3 after a seven-point rebound for August,
pointing to “a decline in industry activity in the short term,” the
central bank said.

Other leading indicators for industry also point to weak activity
ahead. Insee’s index of own-company expectations is far below normal and
the August factory PMI flagged a further contraction in new orders.

France’s services sector was stable in August, with gains in the
management consultancy and advertising sectors offsetting declines for
temporary work, the central bank said. Payrolls were stable and prices
rose marginally. The services climate index regained one point from a
31-month low in July to return to June’s level of 91.

The outlook for services activity in September was stuck at zero
for the fourth month in a row, which the central bank interpreted as a
signal of stability in the short term.

France’s services PMI slipped back into contraction territory in
August (49.2), with new business falling faster (47.1). Insee’s sector
survey showed company expectations sinking in August to the lowest level
in three years.

–Paris newsroom +331 4271 5540; e-mail: ssandelius@mni-news.com

[TOPICS: M$F$$$,M$X$$$,M$$EC$,MT$$$$,MGX$$$]