PARIS, Nov 12 - French industrial output rose 0.4 percent in September versus August, statistics office INSEE said on Wednesday in a report that backed up predictions of a modest recovery in the eurozone's second largest economy. "It's not amazing but it backs up other reports which show the situation is stabilising and poised to increase as the end of the year draws nearer," said Stephane Deo, economist at UBS Warburg. On an annual basis, overall September output was down 1.9 percent. INSEE revised its August output figure to a fall of 0.6 percent in the heatwave-hit month from a previously reported fall of 0.9 month-on-month. Economists polled by in advance had expected on average industrial output to rise 1.0 percent month-on-month, although the August revision explained part of the shortfall between the actual figure and the forecasts. "It was good news that the August figures were revised up," said Veronique Riches-Flores, economist at Societe Generale. "But for September, we had expected more of a rebound. Some sectors have been excluded from the pick-up, such as the automobile sector and consumer goods. This confirms that any recovery will take place in very small steps." Industrial output excluding energy, agri-food business and construction -- considered by INSEE as the best measure of manufacturing output -- rose 0.9 percent in September. France is banking on third-quarter growth to avoid falling into recession -- defined as two consecutive quarters of contraction -- after economic output shrank 0.3 percent in the April-to-June period after first-quarter growth of 0.1 percent. INSEE is expected to report minimal third quarter growth on Thursday when it publishes a "flash estimate" of GDP data. French Finance Minister Francis Mer last week confirmed France's growth outlook of 1.7 percent in 2004 and said the country was now on the road to recovery.
SLOWLY BUT SURELY?
INSEE's Wednesday report showed a rise in the output of semi-finished goods by 2.3 percent, but consumer goods output fell by 1.6 percent in September and output in the automobile sector also registered a slight decrease of 0.2 percent. "Semi-finished goods are on the rise. They are usually first to take off," Deo said. "It's consolidation time. Then we can expect to see things accelerate gradually. In INSEE's quarterly business survey last week, French industry executives delivered their most upbeat quarterly forecast since April 2002, expecting demand to rise in the final quarter of this year. The report came after surveys pointed to expansion in the manufacturing and services sectors in October. But other data last week showed French consumer morale sank to a six-month low in October as households worried by rising unemployment cut back on spending.//