Auto Industry Tumbles, French Industry in Trouble
The output dropped so hard it set a new record as it is the largest fall since January 1991 when the series began. The month-on-month number was down 2.7 percent and it represents a far worse decline than the expected figure of 0.6%.
"It's a catastrophe. I thought we would have a big fall but obviously I did not imagine that it would be as catastrophic," said Dominique Barbet, economist at BNP Paribas. "I had a forecast of -0.5 percent (for gross domestic product in the fourth quarter) but now we will have to think about revising that downwards.”
Economist expects that the country could trip into recession next year as the economy grew just 0.1% in the third quarter. This is also aided by the fact that the car industry tumbled 14.3%, making this the largest decline since August 1999. The car companies are stopping production in many factories, followed by a freeze in the sales sector.
"The main problem out there is the auto sector. With the closing down of factories in December and January the drop could reach 20 to 25 percent month-on-month, which is really huge," said Alexander Law, chief economist with consultancy Xerfi.
As we stated in previous articles, Renault is forced to close its production in 5 factories: Pitesti, Filins, STA Ruiz, Valladolid and Palencia. Furthermore, the manufacturer announced that it will cut 6,000 jobs across Europe.
President Nicolas Sarkozy is giving away a 26 billion euro ($33.76 billion) stimulus package hoping that this will boost the car making industry.