French economy shows signs of rebound

10th November 2005, Comments 0 comments

PARIS, Nov 10 (AFP) - Two key economic indicators spelled good news for the French economy Thursday.

PARIS, Nov 10 (AFP) - Two key economic indicators spelled good news for the French economy Thursday.

First, the French economy grew by 0.7 percent in the third quarter from the figure in the second quarter, the official statistics institute INSEE reported on Thursday. Separately, INSEE also reported that French consumer prices fell by 0.1 percent in October from the September figure, cutting 12-month inflation to 1.8 percent from 2.2 percent in September.

On growth, the adjusted data indicated that even if the economy remained flat for the rest of the year, growth for the whole of 2005 would be 1.5 percent.

Economy and finance minister Thierry Breton said on French Europe 1 radio that the third-quarter figure meant that the government's target of 2.0-2.50 percent growth this year was possible.

Breton said that the growth figure for the third quarter was 50.0 percent higher than many experts had expected and bore out the forecasts by his ministry for several months that the economy had moved up a gear.

He said: "Growth in the second half (of 2005) will be far superior to the figure in the first half and for the whole year we will have, in effect, 1.5-2.0 percent."

This meant that the growth rate of 2.0-2.5 percent for 2005, on which the budget for next year was based, "is altogether realistic and realisable".

Breton said that other finance ministers from the eurozone had also noted an improvement because the value of the euro and the price of oil had fallen. Breton said on the radio that the pressure he had brought to bear on the oil sector in September to contain prices had worked.

However, it was too early to say if the shock of the surge of oil prices was over.

INSEE said meanwhile that the fall in consumer prices reflected mainly a reduction in prices charged for transportation and communications.

A price index adjusted for seasonal changes, was steady in October, having risen by 0.4 percent in September.

And an underlying inflation indicator, which ignores volatile prices for products such as oil and fresh produce, was flat, having risen by 0.2 percent in September. Over 12 months it showed an increase of 0.9 percent, after 1.0 percent in September.

Twelve-month inflation had risen above 2.0 percent, to 2.2 percent, in September.

The index for energy prices, which had played a key part in the rise in September, rose by 0.1 percent in October after an increase of 3.5 percent in September.

The European Central Bank in Frankfurt has a medium term-ceiling for inflation in the eurozone, of which France is a member, of 2.0 percent.

It repeated on Wednesday that it was watching inflationary pressures closely and was ready to increase interest rates at any time, despite pressure from political quarters for a low interest rate regime to be maintained to support continuing uncertain economic recovery.

Copyright AFP

Subject: French news

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