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French factories falter

September 10, 2013

French industrial output has fallen for the second consecutive month, casting doubt on Paris’ claims that the economy is on the road to recovery. Moreover, weak growth has worsened the government’s budget situation.

©PHOTOPQR/L'ALSACE/Jean Francois FREY/ MULHOUSE/LE 13/04/11 - VISITE PRIVEE JDE A L USINE PSA PEUGEOT CITROEN DE MULHOUSE - UNE EMPLOYEE DE LA CHAINE CONTROLE QUALITE ET UNE VOITURE CITROEN C4 Mulhouse north eastern France, april 13th 2011. PSA Peugeot Citroen plant. Production of the Citroen C4. Photo: Jean Francois Frey
Image: picture-alliance/dpa

Industrial production in France fell by 0.6 percent in July, after a drop by 1.4 percent in the previous month, according to latest figures released by the French statistics agency, INSEE, Tuesday.

The factories' decline was most pronounced in the manufacturing industry, INSEE figures showed, which shrank 0.7 percent in the year-on-year comparison.

France's automobile industry, for example, slumped more than 11 percent in spite of a tentative recovery in European car sales this summer.

The slowdown in industrial production is a damper on hopes for a return to robust growth in Europe's second-largest economy, which had just emerged from a recession in the second quarter of 2013. Furthermore, it casts doubt on a government growth forecast of 0.2 percent expansion in the third quarter.

France's urgent need for economic reform

Meanwhile, France's sluggish economy appears set to increase the country's public deficit more than previously expected.

On Tuesday, Finance Minister Pierre Moscovici told a national radio station that the public deficit in 2013 might turn out higher than the previously estimated 3.7 percent of gross domestic product (GDP).

Moscovici attributed the rise to difficult economic conditions and lower tax income for the government.

In spring this year, the European Commission gave France until 2015 to drive its budget deficit below the EU target of 3 percent of GDP. However, the EU's executive arm also called on the country's Socialist president, Francois Hollande, to introduce economic reforms.

uhe/kms (AFP, Reuters)