France headed for slower growth in first half: statistics body

21st March 2008, Comments 0 comments

French economy is likely to suffer a modest slowdown in the first half of the year in the face of a global financial crisis.

   PARIS, March 21, 2008 - The French economy is likely to suffer a
modest slowdown in the first half of the year in the face of a global
financial crisis and inflation of around 3.0 percent, the nationmal statistics
agency said Friday.
   The agency, known as INSEE, forecast momentum of 0.4 percent in the first
quarter and 0.3 percent in the second.
   The Paris-based Organisation for Economic Cooperation and Development on Thursday predicted growth of 0.4 percent in the first and second quarters of
   INSEE said that to achieve an overall expansion of 2.0 percent this year,
the government target, the French economy would have to grow 0.8 percent in
the third and fourth quarters.
   But analysts caution that such a pace might prove unrealistic given the
constraints on the world economy and a global credit crunch brought on by a
sharp downturn in the US housing market.
   Economy Minister Christine Lagarde acknowledged Thursday that the
government's upcoming provisional growth forecasts for the year would be
"slightly lower" than had previously been foreseen.
   She did not provide figures but maintained that the French econony was
performing better than that of France's European Union partners Britain and
   The OECD, however, predicted growth in Germany of 0.6 percent in the first
quarter and 0.4 percent in the second, as well as 0.6 percent in both quarters
in Britain -- stronger momentum than is foreseen in France.
   The INSEE study found that sluggish economic activity combined with tighter
credit conditions would limit growth in productive investment to 0.5 percent
in the first and second quarters.
   At the same time the overall growth pace was likely to be hampered by a
slowdown in consumer spending of 2.0 percent in annual terms over the first
half. But the econony would nonetheless manage to resist the full effects of
"robust and sustained inflation" and weak gains in purchasing power, according to the agency.
   INSEE said annual inflation between now and June should avearge 3.0
percent. While energy-related inflation was expected to ease, with the price
of a barrel of oil stabilising at around 95 dollars, food prices were likely
to rise.
   "This hike in inflation is not a good sign for households, even if they are
able to resist an erosion in their purchasing power," said INSEE economist
Pierre-Olivier Beffy.
   He nonetheless said purchasing power should rise by only 0.3 percent in the
first half, sustained by a stable jobless rate and the impact of tax cuts
approved last year.
   INSEE forecast that unemployment, which declined in 2006 and 2007, would
stabilize at around 7.5 percent of the workforce in the first six months of
the year, when the economy is expected to create 96,000 jobs.


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