Ray of hope seen for French government growth target 02/01/2008 00:00

French economy expanded slightly faster than initially thought in the third quarter

PARIS, January 2, 2007 - The French economy expanded slightly faster
than initially thought in the third quarter, figures showed Friday, raising
hopes the official goal of at least 2.0 percent growth this year might be
approached.
   The national statistics institute INSEE said that after momentum of 0.6
percent in the first quarter and 0.3 percent in the second, the pace picked up
to 0.8 percent in the third quarter.
   The agency earlier put third quarter growth at 0.7 percent.
   The performance to the end of September put France on track for an overall
pace of 1.8 percent this year. But INSEE has said that with growth of 0.5
percent in the final three months of 2007, yearly momentum could come to 1.9
percent.
   That would be well off the 2006 figure of 2.2 percent but would approach
the lower end of the government's 2007 target range of 2.0 to 2.5 percent.
   Friday's "good report holds out the possibility that the end of the year
will be better than what had been indicated in recent data, notably on
spending on manufactured goods," said analyst Nicholas Bouzo of the consultant group Asteres.
   Eric Heyer at the OFCE research center said the government's objective was
"tenable." But he added: "Even at 2.0 perecent growth would only be mediocre."
   At the bank Natixis, economist Jean-Christophe Caffet also predicted growth
of 1.9 percent this year, thanks to the third quarter performance, but was
less optimistic about 2008.
   "Everything will depend on what consumers do with their disposable income.
   "A sluggish global economy could prompt precautionary savings," which would not favour growth, he said.
   The statistics agency attributed the robust showing in the third quarter to
a 0.8 percent hike in consumer spending, up from 0.6 percent in the second.
   But spending so far in the current quarter has showed signs of weakening.
"Consumer sentiment is down on fears of higher prices," said Bouzou of Asteres.
   Unlike the second quarter, foreign trade was a positive contributor -- 0.1
points -- to gross domestic product in the third quarter.
   Another growth pillar, investment, showed an increase of 0.8 percent in the
third quarter after a hike of just 0.4 percent in the second, according to
INSEE.
   The Organisation for Economic Cooperation and Development (OECD) earlier
this month predicted that French growth this year would be held to below 2.0
percent.

AFP