France: Industry Drives The Recovery

French industrial production recovered strongly in January but remains 1.7% below its pre-crisis level. This good performance should continue in the coming months and help the French economy avoid a new recession.

A good start to the year

In France, industrial production recovered strongly in January, posting monthly growth of 3.3%, after declines in December (-0.7%) and November (-0.3%). Compared with the pre-crisis level (February 2020), production is still down 1.7%. Within the industrial segments, manufacturing production recovered in January (+3.3% mom), thanks to a very strong recovery of the pharmaceutical industry (+30.7% mom) which now largely exceeds its pre-crisis level (+25.6% compared to February 2020), but also a very good performance of capital goods manufacturing (+8.4% month-on-month and +1.2% compared to the pre-crisis level). The food-processing, mining, energy and water industries, as well as coking and refining have also contributed favourably to the evolution of industrial production. However, these segments are still well below their pre-crisis levels. The construction sector is in a very good position, posting a level 4.4% above its pre-crisis level and a monthly growth rate of 16.3% in January.

It seems that the French industrial sector has got off to a good start in 2021. Relatively little impacted by the restrictive measures put in place to fight the pandemic, it can fully play its role as a driving force for the French economy at a time when the service sector remains severely hampered. This good performance of French industrial production could continue over the coming months. Indeed, the business climate and the PMI indices in industry improved in February, which should coincide with an increase in production that could continue in March and in the coming months.

The recovery in industrial production is expected to continue in the coming months.

Source: INSEE, ING Economic Research 

A stagnation expected

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