French Industrial Production Declines for Fifth Month

By Francois de Beaupuy and Simon Kennedy

Feb. 10 (Bloomberg) -- French industrial production tumbled for a fifth month in December as auto output plunged, pointing to a deepening recession and rising unemployment.

Output at factories and utilities fell 1.8 percent from the previous month when production declined a revised 2.8 percent, Insee, the Paris-based statistics office, said today. The drop matched the median forecast of 20 economists surveyed by Bloomberg News. Auto output fell 44.6 percent over the year, the biggest annual drop since the series began 18 years ago.

Manufacturing may weaken further in coming months, pushing the French economy into its first recession in 16 years this quarter, the Bank of France said yesterday. President Nicolas Sarkozy yesterday announced 6 billion euros ($7.8 billion) in loans for carmakers PSA Peugeot Citroen and Renault SA after a plunge in sales forced them to trim production.

“We’ll not see a meaningful recovery for several months,” said Gilles Moec, an economist at Bank of America Merrill Lynch in London. “We are very pessimistic for the French outlook.”

Renault SA said last month that it had cut inventories to 70,000 vehicles from more than 100,000 in September, after slashing production by 50 percent in the fourth quarter. Sarkozy said yesterday that Renault and Peugeot will get loans after they pledged not to shut plants or fire people in France.

Stimulus Plan

Sarkozy is also pushing a 26 billion-euro economic-stimulus package to spur construction, investment infrastructure, hiring at small companies and purchases of new cars. He last week announced 1.4 billion euros in “social measures” for impoverished workers and 8 billion euros of tax cuts for manufacturers next year.

The French economy, the second-largest among the nations using the euro, will shrink 0.6 percent in the three months through March, the Paris-based central bank estimated yesterday. The bank forecast in December that the economy contracted 1.1 percent in the final quarter of last year.

Industrial production fell 11.1 percent from a year ago in December, Insee said. French manufacturing production, which excludes energy and food output, dropped 2.8 percent in December from the previous month and 14 percent from a year earlier, Insee said. Auto production fell 7.7 percent in December from the previous month.

Insee is due to release French fourth-quarter GDP figures on Feb. 13. The statistics office had previously reported a 2.4 percent drop in industrial production in November.

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