PARIS (Reuters) - Weak industrial output figures for March on Wednesday added to signs that France's Socialist president-elect Francois Hollande will inherit a sickly economy when he takes office next week, supporting his calls for more policy focus on growth.
Hollande, who has emerged as a figurehead for a fight-back against German-led austerity in the euro zone, will take power in the bloc's second largest economy on Tuesday, the same day that France publishes first quarter economic growth.
Worse-than-expected industrial output figures confirmed expectations that Hollande, who swept to victory in a closely fought election on Sunday, will take the helm of a weakening economy, in contrast with its robust German neighbor.
Statistics agency INSEE said industrial output fell almost twice as fast as predicted in March> It sank 0.9 percent compared with a Reuters forecast for a decline of 0.5 percent.
The size of the drop was attributable to temporary factors, with energy consumption plunging 14.2 percent after February's cold snap. March's decline in output contributed to an overall 0.1 percent fall over the first three months of the year.
However, following a worse-than-expected drop in consumer spending in the same month, the data painted a picture of an economy struggling to gain momentum.
"We are expecting a very light contraction in the French economy in the first quarter - of the order of 0.1 to 0.2 percent," said Helene Baudchon, economist at BNP Paribas, adding that France should avoid recession by returning to growth in the second quarter.
French GDP grew 0.2 percent in the final quarter of last year, and the Bank of France said on Thursday it expected the economy to remain flat in the second quarter of this year.
"You can see the glass as half full, that France is holding up given the weak international situation, or you can see it half empty, that the total absence of progress over a year is not good," Baudchon added.
March's weak figure contrasted with a surprise jump in German industrial output over the same period.
Figures for Italy showed a stronger-than-expected 0.5 percent rise in industry output, but a sharp 2.1 percent slump over the quarter, suggesting that France is still holding up better than some of its other euro zone neighbors.
The Organisation for Economic Co-operation and Development said on Thursday the growth outlook in the euro zone was increasingly divergent, with Germany looking more positive while France and Italy showed signs of sluggish, below-trend activity [ID:nP6E8EN027].
DEFICIT AUDIT
Hollande takes power at a time of intense uncertainty in the euro zone, with renewed fears the single currency bloc could collapse under the weight of its debt and deficit burden as Greece sinks further into crisis.
His campaign promises to increase spending and challenge Germany's focus on austerity have made financial markets nervous, and he will come under close scrutiny in the early days of his presidency to show he can handle the economy.
Economists are under no illusion as to France's sluggish growth prospects, with surveys of purchasing managers already pointing to a weak first quarter and economies across the euro zone floundering.
What matters is whether Hollande can demonstrate a commitment to balancing the country's finances, and how he fares in negotiations with German Chancellor Angela Merkel over integrating pro-growth policies in the fiscal compact.
Hollande has promised to ask the Cour des Comptes - a quasi-judicial body charged with overseeing state finances - to conduct a thorough audit of public accounts as soon as he takes power. Advisers are urging him to use it as a chance to roll back spending promises he made during his election campaign and raise taxes.
"Weak growth in the first quarter was already expected, so it should not worry the markets much, especially after they saw that France was the only country not to contract in the fourth quarter," said Jean-Christophe Caffet, economist at Natixis.
"What we must see now is the audit which the Cour des Comptes will carry out into the French deficit," he said.
Markets remain mindful of the surprise in Spain in February, when Prime Minister Mariano Rajoy's audit on taking power revealed the deficit had been sizeably underestimated.
Meanwhile, Hollande has already begun his drive to persuade European leaders to shift their policy away from austerity, meeting European Council President Herman Van Rompuy on Wednesday. He was scheduled to meet euro group President Jean-Claude Juncker on Thursday.
His first big test as president will come next week shortly after his inauguration, when he travels to Berlin to meet Merkel and begin talks in earnest.
(Additional reporting by Daniel Flynn; Editing by Jeremy Gaunt)