French economic elan grinds to a halt in Q3

21st November 2006, Comments 0 comments

PARIS, Nov 21, 2006 (AFP) - The French economy ground to halt in the third quarter, official figures showed Tuesday, a performance that analysts said could leave France at the bottom of the eurozone growth table this year.

PARIS, Nov 21, 2006 (AFP) - The French economy ground to halt in the third quarter, official figures showed Tuesday, a performance that analysts said could leave France at the bottom of the eurozone growth table this year.

The national statistics institute INSEE, in a second estimate, said momentum in the July to September period came to zero compared with the previous three months.

The forecast confirmed an INSEE estimate earlier this month that surprised economists who had expected third quarter growth of 0.5 percent, and INSEE itself, which had foreseen a gain of 0.6 percent in a note published in early October.

Guaranteed growth, a calculation which assumes no more increases or decreases through the end of the year, was also unchanged at 1.9 percent.

The institute said sustained consumption was offset by poor results in foreign trade and inventory reduction.

On Monday, French Finance Minister Thierry Breton forecast a "very good fourth quarter," with growth of 0.6-0.8 percent from the previous three-month period.

Full-year growth would reach 2-2.5 percent, Breton predicted.

The French budget minister, Jean-François Copé, acknowledged Tuesday that the third quarter did not yield "a good result."

"But our growth goals for this year will be reached," he insisted.

But analyst Marc Touati at investment bank in Natixis warned that France could record annual growth in the best of circumstances limited to 2.1 percent in 2006, which would be below the 12-nation eurozone avrage — likely to be 2.6 percent — for the second straight year.

"What is worse," he said, "for the first time since 1995 France is this year going to be the laggard in euroland growth."

At the research group Asterès Nicolas Bouzou said the third quarter figures highlighted structural weaknesses that mar the competitiveness of the French economy. French exports fell 0.7 percent in the third quarter.

He maintained that France's woes could not be blamed entirely on the international environment, the slowdown in the US economy or the strength of the euro.

"In fact, it's the weakness of our industry, in an extremely competitive global environment, that penalizes our growth," he argued.

"Production figures by sector show it. Activity slowed in all manufacturing branches in the third quarter," he added, in particular the automobile industry.

He also pointed to sluggish investment by non-financial enterprises and a real estate construction sector that ceased to grow in the third quarter.

For analyst Alexander Law at the market research firm Xerfi "the confirmation of zero growth in the third quarter supports our theory that the French economy is clearly incapable of progressing at a sustainable pace about two percent, even when we are assured that all is going well in the best of all possible worlds."

Copyright AFP

Subject: French news

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