"Industrial business leaders judged that their past level of activity rose noticeably, returning to a level close to its long term average," INSEE said in its report. "Stocks of finished products were judged to be very light.
The data adds to a gradually improving picture in the eurozone's second largest economy, which is expected to grow by about 1.5 percent in 2010, according to analysts surveyed by Reuters. However the report also highlighted the fragility of the recovery, with companies in most sectors seeing their own future production levels declining, while their judgement for the overall prospects in industry improved.
"The manufacturers seem to be saying that they think the crisis will come to an end, but that they are not seeing it themselves," said Alexander Law, chief economist at Paris-based consultancy Xerfi. "People are trying to buy into a recovery story, but they are not seeing it in their own sector," he said.
The gloom over the outlook in key sectors, including the car industry, which faces the end of car scrappage incentives which boosted demand last year, and consumer durables, could point to weakness in domestic demand, the motor of the French economy. But there were more positive signs in foreign demand, with order books starting to look more healthy as the global economy improved, even if they remained far from full.
The survey's reading for past production rose to 5 from -2 in December to climb above its long term average of 4, while the stocks component dropped to 1 from 2 the month before.
The readings for both overall orders (-50 compared with -57 in December) and foreign orders (-48 against -58) were among the biggest improvements though both remain well off their long term averages. The index measuring companies' own business expectations fell to -9 in January from -8 in December, while the general business outlook jumped to -4 from -11.