France, Italy Industrial Output Falls, Euro Emphasizing Economic Divide

the French and Italian industrial production unexpectedly fell in October, underscoring the growing economic gap between Germany and the rest of Europe as the crisis of sovereign debt jeopardizes the recovery.

French output of factories, mines and utilities fell 0.8 percent after gaining 0.1 percent in September, the Paris-based statistics office INSEE said today. Italian production fell 0.1 percent after falling 2.1 percent in September, based in Rome, Istat said. Economists expect an increase of 0.3 percent in France and 0.7 per cent increase in Italy.

The recovery of the euro-region is led by Germany, where unemployment is the lowest in almost two decades, while others struggle to catch up. The debt crisis, which pushed the cost gap between Italian and German loans to the wider life of the euro in the last month, threatens to further widen the gap between members and the high-deficit countries cut spending.

"If you look at the last three months of industrial production in Germany, and do the same for France and Italy, which are the weakest, rather large differences," said Nick Kounis, head of macro research at ABN Amro Bank NV in Amsterdam. "But as we move into next year, the areas to see are spending and consumer spending as we are on the verge of a higher tax burden, and exports and industrial production are probably the areas in which we to see a bit of relief. "

Strikes

The euro was little changed at $ 1.3246 at 1:15 pm in London. The extra yield on 10-year Italian bonds compared to their German equivalents rose to 160 basis points from 159 basis points yesterday.

French production was affected by strikes and the blockade of the country's major ports as part of protests against President Nicolas Sarkozy plan to increase the retirement age. The demonstrations, which began Sept. 7 and reached its peak in late October, cost the economy € 200,000,000 ($ 265 million) to 400 million euros a day at its best, estimates of the Ministry of Finance .

Separate data today showed economic growth slowed to Italy by 0.3 percent in the third quarter from 0.5 percent in the last three months. That compares with an initial estimate of 0.2 percent reported on 12 November. The country's growth, industrial production slowed to 2.9 percent annually in October from 4.4 percent in September, the report showed today.

"Even assuming a reasonably strong recovery in the coming months, production in the fourth quarter is likely to be the best planes in the quarter, supporting our call that growth will remain moderate," Luigi Speranza, chief economist inflation tax and BNP Paribas in London, said in an emailed note on industrial production data. Also expects consumption growth to be "crowned by a high level of uncertainty and a further slowdown in the growth of real disposable income."

Italian unemployment rose to 8.6 percent in October, the highest since 2003, according to the office of the European Union statistics. The French unemployment rate fell to 9.8 percent in October from 9.9 percent in September and a decade high of 10 percent in November 2009. That compares with 6.7 percent in Germany, the lowest rate since 1992.