The French industrial sector has reached a new low and the beat that its heart skipped has much to do with the car industry. The confidence in the manufacturing sector went to a fresh low (100.7) in July, back to levels observed in March 2015. One striking fact is the diminishing level of order books: 5.8 months in July (about one month below the level one year ago). Car makers are foreseeing the main weakness, having lost about two months of order books during the last year (6.5 months currently). It was not the first downward adjustment for the sector since car registrations decreased by -4.5% (y/y on average) in May-June. But this time, car makers have not suffered from rising inventories, having adjusted their output on the downside early enough. However, this means lower purchases from car suppliers, electronics, metals and plastics, where order books faltered also and inventories rose steadily. Capacity utilization evolved in conjunction, decreasing to 83.4% in July in the manufacturing sector (-1.2pp from a quarter ago). A stagnation of industrial production is likely in the next few months.
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Weekly Export Risk Outlook 25 July 2019