The Wall Street Journal said that the French manufacturing sector continues to decline at the end of this year, as it recorded a 0.8% decline in production during last September, a decline that exceeded economists’ expectations.
This decline comes – according to the newspaper – after an unexpected rise in August thanks to the good performance of some industries such as cars and pharmaceuticals. However, September witnessed a reversal in this performance, causing a decline in the sector’s overall production.
Economist Claus Vestsen from the Pantheon Macroeconomic Institute stated that the performance of the French industry is “bad, and is likely to get worse at the beginning of the fourth quarter,” pointing to the difficulties facing the industry, especially the automobile sector, in light of the increasing competition from China and the industry’s shift towards cars. Electric, dominated by Asian companies.
Layoffs and factory closures in Europe
With the increasing economic pressures, major European companies such as Michelin and Schaeffler announced the closure of factories and the layoff of more than 5,000 workers, while Volkswagen plans to close 3 factories in Germany, where the company’s workers council said that it seeks to reduce labor costs and ensure the sustainability of its business. In the long term.
In this context, Hildegard Muller, head of the German Automotive Industry Association, said, “Suppliers are able to compete with their products at the international level, but the costs on site make the situation difficult for them.”
She added that action is needed on energy prices, improving investment in infrastructure, strengthening trade agreements and the supply of raw materials.
The energy crisis and its ongoing impact
Although energy prices stabilized after the Russian-Ukrainian crisis in 2022, industries with high energy consumption, such as steel, glass, and automobile manufacturing, still face high costs due to contracts signed during the height of the crisis.
The Wall Street Journal reported that these costs constitute a significant burden on these industries, and directly affect the profits of manufacturers.
Reports indicated that French exports declined significantly in October, recording the fastest decline in international orders, according to reports from Standard & Poor’s Global.
Economist Tariq Kamel Chowdhury of Hamburg Commercial Bank says that the French industrial sector is “trapped in a deep crisis” due to geopolitical tensions and the slowdown in the global economy, which has severely affected international sales.
Economic growth is under threat
Between July and September, the French economy benefited from increased spending during the Olympic and Paralympic Games in Paris, which contributed to unexpected growth.
However, this positive effect is fading in the fourth quarter, putting the second largest economy in the euro area facing weak growth, and making it more difficult to achieve a “soft landing” after years of economic crises.
Chaudhry confirms that “companies are reducing the number of employees and becoming more pessimistic about the coming year,” which reflects a state of pessimism regarding the French economy’s ability to achieve stability and growth amid increasing challenges.
