FRANCE DATA: June IP Surge At Least Partially Due To One-Offs; Weak Outlook

French industrial production was far stronger than expected in June as it surged 3.8% M/M driven in large part but not entirely by catch-up in aeronautical and space construction. Despite that jump, IP fell -0.1% Q/Q in Q2 after 0.1% in Q1 (admittedly with manufacturing at a stronger 0.7% Q/Q) and industrial indicators look soft ahead. 

• IP surprisingly surged 3.8% M/M in June (cons 0.6) after -0.7% M/M in May (revised from -0.5%) and a heavy -1.4% M/M in April.
• It came as manufacturing production jumped 3.5% M/M in June (cons 1.2) after -1.2% in May along with a helping hand from the remaining category of "mining & quarrying, energy, water supply and waste management" (about 18% of total IP) rising 5.0% M/M after 1.7% in May.
• Explaining the former the press release added "The exceptional increase in [the transport] sector was mainly driven by the manufacture of "other transport equipment" (aircraft, shipbuilding, rail, etc.) " (+26.7% after +1.8%), and more specifically by aeronautical and space construction. This is explained by a catch-up over the month of delays accumulated over the quarter and the lifting of constraints on supply chains for certain companies in this sector".
• As such, manufacturing of transport surged 16.6% M/M after 0.3% but the separate category of manufacturing of machinery & equipment goods also increased a strong 4.2% M/M after -1.0% so it wasn't in isolation.
• For a slightly broader take, the alternate classification of capital goods production increased 7.2% M/M for its largest monthly increase since July 2020.
• Highlighting the weak backdrop seen in previous months, despite this (presumably largely one-off) strength in June, IP still fell -0.1% Q/Q non-annualised in Q2 after 0.1% in Q1. Manufacturing was at least stronger at 0.7% in Q2 after 0.2% in Q1.
• It clearly sees production heading into Q3 on better momentum, depending on the extent of the payback seen in July, although broader manufacturing prospects don't appear optimistic. The INSEE manufacturing confidence indicator fell for a third consecutive month to 96.0 in July and the manufacturing PMI was roughly unchanged at 48.2. The press release for the latter noted: "the lack of movement in the headline index masked a host of adverse signals seen in the survey's sub-indices. Most notable was a sharp and accelerated drop in new orders".
• A reminder when it comes to French IP however that France has the lowest industry share of GVA amongst the big five Eurozone countries. The 14% in 2024 compared with 23% in Germany (highest) and 19% in Italy (second highest).