PARIS: France's trade deficit fell more sharply than expected in July mainly due to a drop in imports as the euro zone crisis weighing heavily on domestic demand while the manufacturing sector remained weak.
The gap narrowed to 4.27 billion euros in July from a revised 6.07 billion in June, France's customs office said, far smaller than the Reuters consensus forecast of 5.8 billion.
"We need to look at these figures with lucidity: they are essentially due to a fall in imports which reflects the grave crisis the government is battling against," said Trade Minister Nicole Bricq.
Goods imports dipped to 40.85 billion euros from 42.27 billion as purchases of energy, petroleum products and transport equipment fell.
Flagging domestic consumption, previously the heartbeat of the French economy, has been the main factor behind the stagnation of the French economy, which has flatlined over the past nine months.
By contrast, data from Berlin also released on Friday showed German imports rose 0.9 percent over the month and exports edged up 0.5 percent, narrowing the country's trade surplus. {nL6E8K70ZO]
INDUSTRIAL DECLINE
French exports edged up to 36.58 billion euros from 36.27 billion, driven almost exclusively by a jump in aircraft sales. The number of Airbus jets sold rose to 28 from 24.
Sales of nearly all other manufactured goods were down, excepting cars, the customs office said, after Peugeot successfully launched its 208 model in Britain at the end of June.
But the automaker is also symptomatic of an industrial sector that has shed some 750,000 jobs in the past decade and whose steady decline the euro zone crisis has exacerbated.
PSA said in July was to shed 8,000 domestic jobs, and unions are warning of more cuts to come while the government said unemployment rose through 3 million in August.
Under pressure to reverse this trend, Hollande has promised to do more to help competitiveness, speeding up plans to create a public investment bank to increase research spending and provide credit for cash-strapped firms.
But many economists believe structural reforms are needed to bring down France's high labour costs, and fear Hollande could steer clear of this path to avoid stoking public discontent.
On a more positive note for Hollande, budget office data on Friday showed the central government deficit narrowed to 85.5 billion euros between January and July from 86.6 billon the previous year.
Tax revenues rose 1.0 percent over the period, providing some comfort for the government in its bid to bring the public deficit down to 3 percent of gross domestic product by the end of next year.
But figures also showed more needs to be done on central government spending, which rose 2.9 percent over the period. Hollande's budget projections include a freeze in nominal terms on central government spending -- which accounts for about a third of the state budget -- and he will be under pressure to make cuts when he announces the 2013 budget later this month.
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