French industrial output rebounded more strongly than expected in July, official data showed on Wednesday, suggesting the economy might narrowly avoid slipping into a recession. National statistics office INSEE said output jumped 1.2 percent month-on-month in July, led higher by the volatile auto sector, against analyst expectations of just a 0.1 percent rise.
However, INSEE also revised down the June output figure for the eurozone's second largest economy to a decline of 0.6 percent from a previously reported 0.4 percent drop. French gross domestic product unexpectedly contracted by 0.3 percent in the second quarter and many analysts have previously predicted a further contraction this quarter, which would mean France was technically in recession.
"Industrial output was a bit better than expected ... (and) we might now see some weak growth in the third quarter after all," said Laurent Bilke, an economist at Lehman Brothers. However, economists said it was too soon to say France had turned a corner, with industrial output showing a 2.5 percent drop in the three months to the end of July against the preceeding three months.
"More than anything, this is a correction following two difficult months. Above all, we have to fear that the recent chills seen in German industry will contaminate (France)," said Alexander Law, chief economist at Xerfi in Paris. Data last week showed German industrial output fell a stronger-than-expected 1.8 percent in July, month-on-month, led by a downturn in manufacturing.
Eurozone industrial output data for July will be released on September 12, with economists forecasting a 0.2 pct decline month-on-month and 0.7 percent fall year-on-year. In other data released on Wednesday, the Finance Ministry said France's long-running trade deficit narrowed slightly in July to 4.834 billion euros from 5.36 billion in June.
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