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Lower exports undermine French growth

Friday, November 02 09:44:45

France's manufacturing sector shrank for the eighth straight month in October as a lack of new orders and falling exports posed a growing risk of recession in the last quarter of 2012, a survey showed today. The final Markit/CDAF purchasing managers' index (PMI) for the manufacturing sector rose to 43.7 in October from 42.7 in September, above an earlier flash estimate of 43.5. It was the eighth consecutive month the index has remained below the 50 mark separating growth from contraction. Markit Senior Economist Jack Kennedy said manufacturing in the euro zone's second-biggest economy remained "in a deep downturn" due to anemic demand. "Despite the apparent strength in official industrial production figures over the summer, the survey evidence points to a clear deteriorating trend moving into the fourth quarter, signaling a heightened risk of the French economy falling back into recession before the end of the year," Kennedy said.

The new orders index continued its 16-month contraction, although October's reading of 40.3 was slightly above September's low of 39.6. Survey respondents cited a lack of investment by clients in the auto sector, which depressed orders. France's automotive industry has been laying off workers and shuttering plants in recent months in reaction to a downturn in European demand amid economic gloom and high unemployment, which is running at a 13-year high in France. Reflecting employers' efforts to reduce labor costs, the PMI survey found that job shedding in the manufacturing sector continued at the same rate as September, representing the eighth month of such contraction.

France's 2 trillion euro ($2.60 trillion) economy has not grown since the third quarter of 2011. Unlike Germany, France's economy has not benefited from any lift in exports, which fell in October's index to 43.8 from 44.7 in September. That drop was the sharpest since May 2009. On Wednesday, Finance Minister Pierre Moscovici said the French economy could grow slightly in the third quarter of this year, citing recent pickups in the U.S. and British economies. The Insee national statistics office foresees zero growth, with the Bank of France predicting a contraction of 0.1 percent. ( C ) Reuters