Investments incite French economic growth

20th August 2004, Comments 0 comments

PARIS, Aug 20 (AFP) - The French economy grew by 0.8 percent in the second quarter, spurred by rising business and household investments, official data showed on Friday, feeding optimism that recovery is strong and lasting.

PARIS, Aug 20 (AFP) - The French economy grew by 0.8 percent in the second quarter, spurred by rising business and household investments, official data showed on Friday, feeding optimism that recovery is strong and lasting.

The data fed analysis about the outcome for the full year, with economists pitching for a range of 2.4-2.5 percent, but some warning that growth will slow in the second half.

Ministers have sounded increasingly optimistic in recent months, edging up the range for growth this year and noting on Thursday that the pace over 12 months was now 3.0 percent.

This figure, on a 12-month comparison, was borne out by the latest data from the statistics institute INSEE. Second-quarter growth of gross domestic product of 0.8 percent matched growth in the first quarter.

In the April-May period, business investments rose by 2.2 percent and those by consumers climbed 1.6 percent, it said.

At BNP Paribas bank, economist Jean-Marc Lucas commented that growth had continued at a firm pace in the second quarter, showing that recovery had been under way without significant difficulties for a year. This was despite the rise of the euro and high prices for raw materials.

Half way through the year, the country was assured of full-year growth of 2.1 percent in the absence of any upset, and this suggested an annual average of "close to 2.5 percent", far above 1.7 percent assumed when the budget was drafted.

Growth in the second quarter had again been driven by internal demand. He contrasted this to the driving factor in many other euro zone countries which is exports.

At CDC Ixis bank, economist Florence Beranger said the rises in investment were surprisingly high, probably owing to strong activity in home construction.

In the second half of the year, the high price of oil and an economic slowdown in the United States and Japan were expected to slow French growth, and the unemployment situation would not improve much because companies were increasing productivity.

"However, growth should be at least 2.4 percent this year," she said.

At Natexis Banques Populaires, economist Marc Touati commented: "Growth rose by 0.8 percent in the second quarter and by 3.0 percent on a 12-month comparison. Already France is on track for growth of 2.1 percent this year and should achieve 2.5 in the whole of the year without difficulty."

But he also stressed strong investment by companies which, he said, had surged by a surprising 2.2 percent in the second quarter and by 3.0 percent in the first six months.

However, he warned that many holiday days had fallen on weekends this year, increasing the number of days worked, and noted that France had been catching up from a particularly weak position. Growth in the first half reflected substantial re-stocking.

"For all these reasons, and also because leading indicators for employment remain worryingly negative, that excessive optimism about French growth seems misplaced.

"The French economy will inevitably slow down in coming quarters and is heading for growth of 2.0 percent in 2005."

The data was published a day after Industry Minister Patrick Devedjian said the French economy was now growing at a rate of 3.0 percent on a 12-month basis.

The French statistics institute INSEE said last month that it expected growth this year to be 2.3 percent.

However, politicians and some analysts have revised upwards their view of growth prospects stage by stage in recent months, with Devedjian's figure on Thursday being the highest yet.

© AFP

Subject: French news

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