Euronomics: France, Italy Highlight 1Q Divergences
By Brian Blackstone
Of DOW JONES NEWSWIRES
PARIS (Dow Jones)--How's the euro zone economy doing?
It depends on what country you're looking at. Following 2001 trends, the
latest industrial production data indicate that France is still outperforming
other large euro-zone economies like Germany and Italy.
Taken together, the country-specific data point to a modest gain in first
quarter gross domestic product in the region. How it performs the rest of the
year depends on whether Italy and Germany can replicate French activity.
Buoyed by stepped-up production of automobiles and energy, French industrial
output swelled 0.5% in March compared to the previous month, about double
expectations. Following February's upward revision, output in the manufacturing
sector, which excludes energy and food, increased 0.7% during the first quarter
after falling 2.2% the previous quarter.
With consumer spending remaining pretty well supported, the factory numbers
"are in line with relatively strong growth in the first quarter," said Stephane
Deo, economist at UBS Warburg in Paris.
Deo estimates that the euro zone's second-largest economy expanded 0.5% on
quarter between January and March.
Some economists worry that consumers aren't keeping up with production,
especially in the automobile sector, suggesting that recent output gains may be
reversed in the months ahead.
For instance, automobile production increased 1% on a monthly basis in March
after surging 2.6% the previous month. At the same time, new car registrations
fell 5.6% versus prior-year levels in March. So those newly minted cars maybe
be sitting in dealers' showrooms and not in driveways.
Though CDC IXIS economist Laure Maillard in Paris forecasts 0.4% first
quarter GDP growth in France, she cautioned that "it would come mainly from
restocking."
Slim Gain In Euro-Zone GDP
Unlike France, there was little good news in the March factory report for
Italy as well as first quarter GDP numbers.
Industrial production in the euro zone's third-biggest economy fell 0.7% on a
monthly basis, well below expectations of a 0.7% increase. GDP expanded just
0.2% on a quarterly basis.
On an unadjusted basis, industrial production was down 7.6% on the year, the
biggest fall since August 1996.
"Today's numbers are particularly negative," said an official at the
government statistics bureau Istat.
But not completely negative, Deo argues, because though factories remain
weak, things have improved since last year.
"It is important to note that on a quarterly basis industrial production is
up 0.2% in the first quarter, the first positive number since the fourth
quarter of 2000," Deo said.
Last week, Germany reported a 0.8% monthly decline in March industrial
production, highlighting the fragility of the recovery in the euro zone's
largest economy.
"It's plain from these figures and surveys that the industrial sector has
passed a bottom during the first quarter and the upturn over the euro zone as a
whole was really very gradual," said Norman Williams, economist at Barclays
Capital.
He estimates that the region looked more like Italy than France, growing at
only a 0.2% quarterly clip between January and March. Though better than the
fourth-quarter contraction, such a gain looks miserable compared to the 5.8%
annualized expansion in the U.S. during the first three months of the year.
Though all economies in the region appear to be expanding now, "France's
industrial sector has been performing better than Germany and Italy for a
number of years now," Williams noted.
Deo reasons that with global trade recovering the euro zone as a whole will
move more in France's direction for the rest of the year, with GDP expanding at
quarterly rates of 0.6%, 0.7% and 0.8% in the final three quarters of 2002.
-By Brian Blackstone; Dow Jones Newswires; 33-1-40-17-17-40;
brian.blackstone@dowjones.com
(END) Dow Jones Newswires 15-05-02
0925GMT |
