French industrial production to be firm in July

The Banque of France survey of the manufacturing sector suggests that manufacturing output increased in July at a below-trend pace and stalled in August. The INSEE survey of the manufacturing sector showed that the domestic and foreign order books have been replenished and that the inventory-to-orders ratio was 0.8 standard deviations above the average high in July (and decreased in August). 

"We expect industrial activity to have increased by 0.4% mom (+0.7% yoy) in July. Looking at the breakdown, energy output is likely to have risen significantly, by 0.2% mom. Meanwhile, manufacturing output should show an increase of 0.4% mom for July. Overall, we expect industrial output to have increased by 0.6% qoq in Q3 15", said Societe Generale in a report on Thursday. 

The good news is that the personal production outlook component, which is usually the best indicator of actual activity changes, rose in August to 7, slightly above the historical average. This points to a significant quickening in manufacturing activity in Q3 15. However, the INSEE quarterly survey of manufacturing does not suggest that the recovery will be strongly led by investment. 

"According to INSEE survey, business leaders have revised down their investment expectations. They now anticipate a 2% rebound in investment in 2015, down from the previous estimate of 7% in April. By historical standards, 2% is low. Concerns over China will not improve the situation", notes SocGen.