New economic data released Friday indicated that France's budget
deficit narrowed in July, even as industrial production in June
stalled. The French Treasury Agency reported that the budget
deficit narrowed in July following an increase in June and the
National Institute of Statistics and Economic Studies (INSEE)
reported that industrial production remained flat in June.
The French Treasury reported that the French budget deficit
narrowed to 56.7 billion euros in July from 69.6 billion euros in
June and narrowed to be the smallest deficit in nearly two months.
Deficits are rather cyclical, as tax revenues generally spike in
the beginning of the year as people pay income taxes, and this can
be seen in the deficit data. The French deficit in February fell to
a mere 13.4 billion euros from 148.8 billion euros in January.
INSEE also reported that industrial production growth stalled in
June as industrial production neither grew nor contracted but
remained constant from June. This was better than the downwardly
revised 2.1 percent rate of contraction in May from April but
missed economist estimates of a 0.4 percent rise. The weak data
shows that France has been unable to escape the global economic
slowdown that has been plaguing economies for the past few
The weak French data followed
weak trade data released in China overnight
. Also, a survey by the Philadelphia branch of the Federal Reserve
showed that economists have ratcheted down U.S. GDP growth
expectations for the third quarter of 2012 to 1.6 percent from 2.5
percent at the last survey. The same economists also expect the
unemployment rate to finish the quarter at 8.2 percent, higher than
the last survey's 8.0 percent expectation.
French shares fell on the news, as the benchmark CAC Index fell
0.61 percent and the euro weakened against the U.S. dollar. French
10-year bond yields fell, however, as investors looked for safe
yields. French 10-year yields fell to 2.076 percent from 2.097
percent at the open and after reaching a high of 2.11 percent.
2-year bond yields also fell on the day, from 0.18 percent at the
open to 0.161 percent as of writing.
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