Latest French economic stats: a 'blow with a club'

10th November 2006, Comments 0 comments

PARIS, Nov 10, 2006 (AFP) - The French economy stagnated in the third quarter of the year, official data showed on Friday, an abrupt slowdown that surprised analysts and spelled bad news for the centre-right government six months before presidential elections.

PARIS, Nov 10, 2006 (AFP) - The French economy stagnated in the third quarter of the year, official data showed on Friday, an abrupt slowdown that surprised analysts and spelled bad news for the centre-right government six months before presidential elections.

Figures from French statistics agency INSEE showed the economy registered zero growth in the third quarter compared with the second quarter, casting doubt on a government target of 2.3 percent growth this year.

"It's like a blow with a club," said an analyst at the Paris-based Asterès economic consultancy, Nicolas Bouzou.

"For sure, after the exceptional growth in the second quarter everyone expected a lower figure — I predicted 0.4-0.5 percent — but this was without counting on the extreme fragility of the French economy, which is incapable of stringing together two consecutive quarters of strong growth."

During a visit to eastern France, Prime Minister Dominique de Villepin commented: "We had a pause in growth unfortunately even though we had a very good figure in the second quarter.

An economist at the bank Natexis Banques Populaires said the data would be an embarrassment for Finance Minister Thierry Breton who had rejoiced at second quarter data which had shown growth of 1.2 percent.

"Have a quiet thought for Mr. Breton who, instead of leading a media offensive like he did three months ago after the strong growth in the second quarter, risks hiding his face today," said economist Marc Touati.

"He will not be able to cry from the rooftops that France will report 'one of the strongest growth rates in the eurozone and even higher than the United States'."

Releasing a raft of economic data providing the latest view on the health of the French economy, INSEE also said that industrial production had fallen in September by 0.9 percent compared with August after a rise of 0.9 percent in August from July.

The growth data is a first estimate and is subject to revision, but evidence of such weakness in the French economy, the second-biggest in the eurozone, is also a blow for hopes of a broader recovery in Europe this year.

Most analysts had been forecasting robust expansion in France this year measured by the weak standards of the recent past, with an improving jobs market set to power the economy to above-trend growth.

Private sector economists surveyed by AFP had on average predicted growth of 0.5 percent in the third quarter and INSEE economists had forecast growth of 0.6 percent at their last press conference at the beginning of October.

The European Commission shares the French government forecast for growth in gross domestic product of 2.3 percent this year, while the International Monetary Fund is even more optimistic with a prediction of 2.5 percent.

INSEE said that growth over the full year would be "close to 1.9 percent" providing the French economy did not contract in the fourth quarter. Any further growth in the fourth quarter would boost this figure.

The government led by Villepin has put economic reform at the centre of its agenda, declaring the fight against unemployment one of its priorities, as well as improving budgeting and reducing the public debt.

Villepin noted improvement in unemployment, saying: "We have scored some points but it is not enough."

On October 30, French President Jacques Chirac announced that unemployment had fallen to 8.8 percent in September, its lowest level in five years.

The first round of presidential elections has been set for April next year with the opposition Socialist party likely to capitalise on signs that the overall economy might be flagging.

In other data published on Friday, INSEE said that consumer prices had fallen in October by 0.2 percent on a monthly basis and were 1.1 percent higher over 12 months.

The French trade balance in September narrowed in September however, showing a deficit of EUR 1.348 billion from EUR 2.872 billion in August according to revised figures given by the French customs service.

Copyright AFP

Subject: French news

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