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News : EU Economy Last Updated: Aug 9, 2012 - 7:34 AM

France may return to recession; Industrial output down in Germany and Spain
By Finfacts Team
Aug 8, 2012 - 4:17 PM

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20 euro hologram stripe: Banque de France printing works, Chamalières.

The Banque de France warned Wednesday that it expects France's GDP (gross domestic product)  to contract in the third quarter, following a similar fall in the second quarter. If confirmed, it would officially return the country to recession. Meanwhile industrial production data issued in Germany and Spain today showed falls in June. On Tuesday it was reported that industrial production fell in both the UK and Italy.

In an economic outlook, France's central bank forecast a 0.1% shrinkage of GDP for the third quarter of this year - -  similar to the output fall in the second quarter while there was zero growth in the first quarter of 2012.

France has had a trade deficit every year since 2012 and last February, it reported that the negative gap between exports and imports had widened in 2011 to a record €69.6bn from €51.5bn in 2010. Germany reported that its foreign trade balance showed a surplus of €158.1bn in 2011. In 2010, the surplus amounted to €154.9bn.

France's previous record deficit was €56bn in 2008. Finfacts Premium article

The trade deficit remains high and was €34.9bn in the first half of the year, down from €38.2bn in the first six months of 2011.

Trade Minister Nicole Bricq said the data reflected a weakening world economy and the crisis in Europe but she added: "That said, they also reflect a problem with the competitiveness of our businesses. We need far more businesses and we need much stronger businesses."

Italy reported Tuesday that second-quarter GDP was down 2.5% from a year before while German manufacturing orders fell 1.7% in June, mainly related to a dip in demand in the Eurozone.

New French housing starts in the second quarter were 14% below 2011 levels while July car sales fell 7.0% on a year earlier.

France's jobless rate is almost 10% of the workforce with a further 5.0% on involuntary short-time.

The current official forecast is GDP growth of 0.3% in 2012 and 1.2% for 2013.

Further spending cuts are planned to cut the public deficit from 4.5% of GDP this year to the EU limit of 3.0% by the end of 2013.

Germany and Spain

Germany's economic ministry said today that industrial output fell 0.9% on the month of June in seasonally adjusted terms, compared with a 1.7% gain in May.

Earlier Wednesday, Destatis, the federal statistics office reported that German exports fell 1.5% on the month in June after rising 4.2% in May.

"The still-weak euro exchange rate will act as some kind of air bag" for German companies, which are far more exposed to business outside the bloc than their Eurozone peers, said Andreas Rees, an economist at UniCredit in Munich.

Spanish industrial output data showed a 10th consecutive decline in June.

Spain's national statistics office INE reported that industrial output was down by adjusted 6.3% annually, compared with a 6.5% decline in May. On an unadjusted basis, overall production slipped 6.9% from a year ago, following a 5.7% fall in May.

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