French industrial output drops unexpectedly in July

French industrial production declined unexpectedly in July, with a seasonally and calendar-adjusted drop of 0.4% month-over-month, according to data released by the national statistics agency Insee on Wednesday. The decline marked the first such contraction since March, driven by persistent weakness in the manufacturing sector. Analysts had anticipated a modest increase, highlighting the data as an early indicator of potential challenges in the second quarter after the economy had narrowly avoided recession in the first half of the year. The French government will publish its growth projections later this week, ahead of budget discussions that may tighten fiscal spending amid a large deficit for the coming year. Meanwhile, a prolonged heatwave had also weighed on agricultural output, further straining the economy. The manufacturing sector’s weakness was evident in both France and Germany, where industrial production also fell unexpectedly in July—by the largest margin since nearly a year earlier.