French industrial production rose less than expected in June, with new data suggesting economic expansion in the euro zone's second-biggest economy has yet to become robust.
According to the national statistics institute, INSEE, output climbed 0.3 per cent from the previous month and fell 0.2 per cent in the second quarter compared with the same period a year earlier. That compared with economists' expectations of a monthly increase of 0.5 per cent.
Economists said the data indicated growth figures for the second quarter, released on Friday, would show sluggish economic expansion, particularly given a downward revision to May's data, which cut the monthly increase to 0.1 per cent from 0.3 per cent.
"What we did not expect was the significant downward revision for the May figures. Overall, industrial output will stay flat in the second quarter and that does not bode well for the GDP (gross domestic product) flash estimate to be announced on Friday," said Maryse Pogodzinski, economist at JP Morgan.
Neville Hill, European economist at CSFB, predicted the French economy grew at a quarterly clip of no more than 0.2 per cent in the second quarter.
Such GDP figures could be disappointing news for the French government which is counting on a pick-up in growth to help cut joblessness and meet its goal of cutting the deficit to below European Union limits this year.
Finance Minister Thierry Breton has already been forced to cut the official forecast range for growth this year and is now aiming for a maximum of 2 per cent rather than 2.5 per cent. Industrial production excluding energy, agri-food businesses and construction, which statistics office INSEE considers the best measure of manufacturing output, rose 0.3 per cent in June from the previous month and was flat in the second quarter from a year earlier.
Expectations that manufacturing output will pick up in the coming quarters have been stoked by recent soundings of French business sentiment.
Purchasing managers in the manufacturing sector are reporting expanding output for the second month running and growth in new orders, recent data has showed.
French manufacturing demand is expected to rise in the third quarter of 2005 after a fall in the sector in the second quarter, according to an INSEE survey at the end of July.