14 August 2008

PARIS - The French economy contracted by 0.3 percent in the second quarter of 2008, the statistics institute INSEE said on Thursday, signalling the first setback for nearly six years.

INSEE said the contraction in the second quarter, in contrast to its expectations that the economy would grow, was the first since the fourth quarter of 2002.

Until now, INSEE had forecast that the economy would grow in the second quarter, by 0.2 percent.

The data was a first estimate, subject to revision, and INSEE revised downwards its previous estimate for growth in the first quarter to 0.4 percent from 0.5 percent.

France has the second-biggest economy in the eurozone, after Germany which earlier had announced that its economy had contracted by 0.5 percent in the second quarter.

Last week the president of the European Central Bank, Jean-Claude Trichet, warned of signs that the eurozone economy was slowing down, and his remarks helped push the euro down sharply against the dollar.

Since then a number of countries in Europe have signalled sharply weaker growth data.

French Economy Minister Lagarde, said the contraction had been expected but the data was not good.

She said the data arose from the sluggish international economic climate "rises in the prices of raw materials, weakness of the dollar." and "inflation".

Provisional data from INSSDE also showed that the number of salaried employees fell by 0.1 percent during the quarter, but was still on course for an annual rise of 1.1 percent over 2007.

[AFP / Expatica]