France's central bank said on Monday it expected the euro zone's second-largest economy to contract in the fourth quarter of 2012, a state underlined by data showing tumbling car sales. The Bank of France repeated a prediction that gross domestic product will drop 0.1 percent in the three month to the end of the year, compared with the third quarter.
A statistics office report separately showed that the troubles of France's car industry continue to take a heavy toll on overall activity, falling for a 12th straight month in October. Industrial output, which forecasters had expected to pick up marginally following a 2.7 percent plunge in October, dipped 0.7 percent in October versus September levels - and a large part of that was due to a further fall of 4.7 percent in auto sector output.
There is little prospect of an rapid turnaround due to weak demand and overcapacity in the car sector both in France and internationally. PSA Peugeot-Citroen, which plans to shed 10,000 jobs, is idling its Sochaux plant in eastern France for 19 days over the Christmas holiday period.
"In addition to the slowdown in growth resulting from the euro zone crisis, the weakness in the car industry should continue to be a drag in Q4 (the fourth quarter)," said HSBC bank economist Pierre-Emmanuel Ferraton. The Bank of France stuck to its prediction of a small drop in fourth-quarter GDP despite news since it first made such a prediction that the French economy had fared better than many predicted in the third, July-September, quarter.
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