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UPDATE 1-French industry output beats expectations

By Vicky Buffery PARIS, May 10 (Reuters) - French industrial output registered a stronger-than-expected rise in March, data on Monday showed, raising hopes the euro zone's second largest economy is picking up pace after a sluggish start to the year. National statistics office INSEE said industry output grew 1.0 percent month-on-month in March after stagnating in February, far exceeding a Reuters consensus forecast for a rise of 0.3 percent on the month. Following on from last week's trade data which showed a rise in exports in March, the reading suggests the French economy is starting to benefit from the pick-up in global trade, putting it on a strong footing for the second quarter. "In all, I think we're seeing the effect of the global recovery which is continuing to boost industry," said Olivier Bizimana, economist at Credit Agricole. "What this tells us is that we're starting the second quarter on a good basis, and that the second quarter will doubtless be better than the first," he said. With euro zone and international policy makers agreeing plans for a 750 billion euros ($1,000 billion) rescue package to try to prevent the Greek debt crisis spreading, the data will add to hopes that a modest recovery may underpin the crisis effort. Preliminary first quarter gross domestic product figures due out on Wednesday are expected to show that growth slowed at the start of the year, due to weak consumer demand and the whittling down of temporary props such as the car scrappage bonus. BANK OF FRANCE SEES 0.5 PCT RISE IN Q2 GDP INSEE has forecast GDP growth of 0.2 percent for the period, compared to expansion of 0.6 percent in the last months of 2009, a rate which raises doubts about the official government forecast of 1.4 percent growth for the whole of 2010. The Bank of France forecasts 0.4 percent growth in the first quarter but in its latest survey on Monday, it said it expected GDP growth to accelerate to 0.5 percent in the second quarter. March industry output figures showed car production continued to slow at the end of the first quarter, dropping 1.6 percent on the month. But this was offset by a rise in output in other segments, pointing to an improvement in the economic environment. Overall manufacturing output rose 0.8 percent on the month, with pharmaceutical goods gaining 2.0 percent, and production of metal goods rising 2.1 percent. Mining and energy industries, meanwhile, added 2.7 percent on the month. The data chimes with recent PMI surveys for manufacturing industry which have shown activity began to accelerate in March after slowing in the first months of the year. April's factory PMI reading reached its highest since July 2006, adding to hopes of stronger growth in the second quarter. "We've got quite a few indicators that activity in the seond quarter (...) has been relatively good, notably in the manufacturing sector," said Laurent Bilke, economist at Nomura. However, despite the improvement in industry, fuelled by global trade, there are still uncertainties surrounding France's dominant services sector, heavily dependent on domestic demand. "When you look at the surveys in services, we're still looking at a deceleration," said Bizimana. (For a table of data, double click on (Reporting by Vicky Buffery; Editing by Stephen Nisbet) ($1=.7453 Euro) Keywords: FRANCE ECONOMY/OUTPUT (vicky.buffery@thomsonreuters.com; +33 1 49495093; Reuters Messaging: vicky.buffery.thomsonreuters@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.

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