A recent rebound in French manufacturing output may prove to be short-lived, due to weak demand, energy pressures, and geopolitical instability, ING has warned.
Charlotte de Montpellier, senior economist, ING France and Switzerland, was commenting following recent data that showed manufacturing output in France increased by 1.2% month-on-month in March, after a 0.1% decline in February.
In addition, overall industrial production rose by 1%, following a 0.9% contraction the previous month. Manufacturing output was 1.5% higher, year-on-year, during the first quarter. In coking and refining, meanwhile, output rose by 6.3% month-on-month to reach its highest level in seven years.
As de Montpellier noted, this rebound had been anticipated.
“Since the start of the war in the Middle East, French industries have benefited from an improvement in their competitiveness relative to Asian competitors, which have been more severely and immediately affected by disruptions to energy supplies,” she commented. “In addition, the risks of shortages and price increases led manufacturers to bring forward their orders and increase inventories in March, boosting production.”
Short-lived boost
While this is likely to remain the case in April, external factors mean that any boost is set to be short-lived.
“On the one hand, the energy crisis is not improving, and the risk of shortages is also likely to affect Europe rapidly,” said de Montpellier.
“The improvement in relative competitiveness could therefore come to an end quickly. Moreover, the rise in production has led to higher inventories of industrial goods, but not to higher sales. As indicated by the GDP data for the first quarter, both domestic and external demand are very weak. April survey data also point to a further deterioration in demand.”
GDP contraction
Without an improvement in the Middle East situation and lower energy prices, the risk of a contraction in French GDP during the second quarter is increasing, ING noted.
The bank is now forecasting economic growth of 0.6% for France in 2026, compared with 0.9% growth recorded last year.
It has also suggested that weaker growth could complicate the French government’s fiscal plans. ING said the government’s target of reducing the budget deficit to 5% of GDP in 2026, from 5.1% in 2025, may become more difficult to achieve amid slower economic growth and political pressures ahead of the 2027 presidential election.
“Overall, despite the increase in industrial production in March, the outlook remains gloomy for the French economy,” said de Montpellier. Read more here.
