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Friday, October 10, 2008

French Industry Contracted In August

French industrial production declined in August, further evidence that the second-largest economy of the 15 countries sharing the euro probably slipped into recession last quarter. Output at French factories and utilities fell 0.4 percent from a revised 1.4 percent increase in July, the Paris-based statistics office said today.

The decline in production is clear from the anove chart and looks set to worsen as demand and confidence fall on the prospect that the global credit crisis may cause a worldwide recession.

Just one indication of where we are headed may be found in the fact that France's manufacturing PMI dropped to 43.0 in September, its lowest level since December 2001. A steep decline in new orders led to substantially lower production, while employment levels contracted at fastest pace for over five years

According to the September Markit/CDAF PMI survey the performance of France's manufacturing sector worsened further in September, precipitated by a heavy drop in incoming new orders following a drop in domestic demand. The headline Purchasing Managers' Index fell from 45.8 in August to 43.0, its lowest level since December 2001.

The national statistics institute Insee has said that France likely slipped into recession in the third quarter after the economy contracted in the three months through June. Insee reported on Oct. 3 that gross domestic product probably shrank 0.1 percent in the third quarter after a contraction of 0.3 percent in the three months through June. The economy will also shrink 0.1 percent in the final three months to cut growth to 0.9 percent for the full year, the slowest pace since 1993, Insee said.

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