Statistics body sees slide in French growth this year

20th December 2007, Comments 0 comments

Growth should slow to 1.9 percent this year from 2.2 percent in 2006, the statistics institute INSEE reported

   PARIS, December 20, 2007 - French economic growth should slow to 1.9
percent this year from 2.2 percent in 2006, the statistics institute INSEE
reported Thursday, in a forecast that fell short of the 2.0-2.5 percent range
foreseen by the government.
   The agency also warned that France would not be spared the impact of global
economic weakness, with growth slipping further between now and the end of the
first half of 2008.
   While momentum picked up 0.7 percent in the third quarter of 2007,
"economic activity should return to a more moderate pace" in the months to
late June next year.
   INSEE predicted that growth would come to 0.5 percent in the final three
months of this year, 0.5 percent in the first quarter of 2008 and 0.4 percent
in the second.
   On the critical issue of unemployment, which has bedeviled the French
economy for years, INSEE said joblessness should continue to decline in early
2008, albeit at a weaker pace than this year, to reach 7.7 percent of the
workforce by the end of the first quarter from 7.8 percent in fourth quarter
   "An average of 20,000 people every quarter left unemployment in
metropolitan France" in 2007 against double that number in 2006, according to
   But the economy was expected to create 348,000 jobs this year after 282,000
in 2006.
   Elsewhere in its report the statistics agency predicted that inflation,
driven by energy and food prices, would reach a peak of 2.8 percent in
February before falling back to an annual 2.4 percent at the end of June.
   "A marked slowdown in earnings and higher inflation is likely to lead to
weakened household purchasing power in the first half of 2008," INSEE said,
foreseeing a gain of just 1.2 percent in annual terms.
   For all of 2007 household purchasing power was expected to show an increase
of 3.3 percent against 2.4 percent in 2006.
   Despite the decline in disposable income, consumer spending is not expected
to be seriously dented, with households forecast to dip into savings,
according to the report.
   INSEE finally said a widening trade deficit should shave 0.3 percentage
points from overall growth this year, as it did in 2006.
   It said that while French exporters were gaining some ground in overseas
markets, France's external trade balance would be hampered by a strong euro
and fewer foreign orders in a less robust global economy.

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