World Economy

France, Spain Growth Beat Forecasts Rates

France, Spain Growth Beat Forecasts Rates
France, Spain Growth Beat Forecasts Rates

The French and Spanish economies grew faster than economists forecast in the first quarter, suggesting some momentum in the eurozone’s expansion.

French economic growth firmed at the start of the year, statistics showed Friday, indicating the eurozone’s second-largest economy is on a gradual recovery path.

French gross domestic product expanded 0.5% in the first quarter from the final quarter of 2015, when it grew 0.3%, national statistics agency Insee said, news outlets reported.

Economists polled by The Wall Street Journal had expected a 0.4% expansion in the first quarter.

In France, consumer spending rebounded sharply after a lull at the end of 2015 and business investment growth accelerated. The strength of those domestic growth engines more than offset a 0.2 percentage point drag on GDP from foreign trade.

In a preliminary reading of gross domestic product for the quarter, Insee said the €2 trillion ($2.28 trillion) economy had accelerated from the 0.3% growth posted in the previous three months, with a 1.6% increase in corporate investment offering hope the stronger growth could be sustained.

The figures mark the third straight quarter of GDP expansion and support President Francois Hollande’s claim that the economic situation is improving after years of near stagnation.

But the steady pace of the recovery has so far proven insufficient to halt the rise in France’s public debt levels or make a significant dent in near record-high unemployment.

Hollande, whose government is trying to push through a long-awaited reform aimed at making France’s rigid labor laws more flexible, received a boost this week as data showed that French unemployment in March saw the biggest monthly fall in 15 years.

The number of people out of work in mainland France dropped 60,000 compared with February to 3.53 million, down 1.7% in a single month, the country’s labor ministry said late Tuesday.

In Spain, the economy grew at an unchanged rate of 0.8% during the first quarter. That was despite a period of political uncertainty economists feared would hinder consumer spending and investment.

Spaniards are set to vote a second time in June after no single party won an outright majority in December elections.

The chief executive of Banco Santander SA, the largest bank in Spain and the eurozone by market value, was sanguine on Thursday at an earnings presentation.

“The recovery is sustained,” Jose Antonio Alvarez said. Political uncertainty could chip away at economic growth by a tenth of a percentage point, Alvarez added, but it won’t derail Spain’s strong growth.

And while Spanish consumer confidence levels have fallen since the beginning of the year, they are still close to pre-crisis levels, when consumption grew strongly, notes Ignacio de la Torre, chief economist at boutique investment bank Arcano Group in Madrid. Car sales are also up.

“During 2016 and 2017, Spain will enjoy greater economic growth than many of its neighboring countries as wages recover,” de la Torre wrote in an April research report. Spain “will continue to generate large volumes of employment and real estate continues with its recovery.”