January 26, 2018 / 12:04 PM / a year ago

French industry morale signals no end in sight to boom

PARIS (Reuters) - France’s industrial rebound gathered pace in January while broader business confidence and consumer morale remained strong but pulled back from recent highs, surveys showed on Friday.

Measures of business and consumer confidence have scaled multi-year peaks since the election of President Emmanuel Macron last May on a pro-business reform agenda, but some economists question how long the upswing can continue before it starts losing steam.

The industrial sector started the year signalling that there is no immediate end in sight to its boom, going by a monthly industrial confidence survey from the INSEE statistics agency.

Economists had expected it would hold steady in January, but instead it returned to a 17-year high reached in November.

Long a weak point of France’s economy after years of losing competitiveness, French industry is seeing demand surge to levels not reached since April 2011, a separate more in-depth quarterly survey from INSEE showed.

Business is so brisk for French manufacturers that the number of firms reporting production bottlenecks is the highest in 28 years at 37 percent. More than 40 percent reported difficulties recruiting workers, INSEE said.

That bodes well for investment and jobs as companies are forced to put money into new plant and equipment to keep up with demand while taking on additional workers.

In contrast to the strength in industry, overall business confidence weakened in January as morale in the service and construction sectors pulled back from heights not seen since 2011 in December.

Meanwhile, consumer confidence fell marginally, although that was largely because the January figure was rounded down. Nonetheless, economists had on average pencilled in expectations for a slight improvement.

INSEE’s monthly survey of consumer confidence found that households expecting inflation to rise increased this month while their concerns about unemployment fell.

With France in the midst of its strongest economic pick-up since 2011, firms have stepped up hiring to record levels in the last quarter of 2017, data published this week showed.

Economists polled by Reuters this month expect on average the economy to grow 2.0 percent this year, while Barclays raised its forecast on Friday to 2.4 percent, which would be the best growth rate since 2006.

“The upgrade to our forecast is mainly the result of two factors: 1) less drag from net trade owing to, among other things, better global growth prospects, and 2) upgraded private consumption,” the bank said in a research note.

Reporting by Leigh Thomas; Editing by Richard Lough/Keith Weir

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