French Industrial Output Increased More Than Forecast

By Francois de Beaupuy and Helene Fouquet

Sept. 10 (Bloomberg) -- French industrial production rose more than expected in July after car output increased and oil prices fell.

Output from factories and utilities climbed 1.2 percent from June, when it fell 0.6 percent, said Insee, the national statistics office, in Paris today. Economists expected an increase of 0.2 percent, according to the median of 20 forecasts in a survey by Bloomberg News. Industrial production accounts for about 15 percent of the euro-area's second-largest economy.

Manufacturers may struggle to increase production as the French economy, which contracted in the second quarter, is skirting recession for the first time since 1993. While oil prices have dropped 28 percent since touching a record $147.27 per barrel in July, they are still 34 percent higher than a year ago and a U.S. slowdown is dragging down growth across the world.

``This rebound should not make us forget that French economy is just going to avoid recession and we don't expect it to grow more than 1 percent this year,'' said Cedric Thellier, an economist at Natixis, in an interview with Bloomberg Television.

France's trade deficit narrowed in July from a record as exports rose 0.3 percent to 35 billion euros ($49.5 billion) and imports fell 1 percent to 39.8 billion euros. Imports of oil products and cars fell

Industrial production in the period from May to July dropped 1.9 percent from a year earlier, Insee said. Year on year, output fell 2.3 percent.

Confidence

Output of cars increased 5.1 percent in July from a month earlier, Insee said. The French car producers association said that truck sales rose 5.2 percent in July from a year before and climbed 19.3 percent in the seven months through July.

French business confidence dropped to the lowest in more than three years in July, suggesting manufacturing activity will slow in coming months. The European Union will cut its growth forecast today as confidence wanes and inflation expectations increase, Commissioner Joaquin Almunia said yesterday.

L'Oreal SA, the world's largest cosmetics maker, said on Aug. 28 that first-half profit rose 6.8 percent, the slowest pace in three years, after European and U.S. shoppers pared spending on makeup and perfumes.

The French economy will probably expand about 1 percent this year, Prime Minister Francois Fillon said Sept. 1, down from a previous growth forecast of 1.7 percent to 2 percent.

To contact the reporters on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net.