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France Shows Meager Growth

The Q3 growth was strongest in services, construction and refineries.The Q3 growth was strongest in services, construction and refineries.

France is on a “path of growth”, President Francois Hollande said after economists announced that third quarter growth was 0.2%. Although weaker than hoped, the trend was at least upwards after a 0.1% fall in the second quarter.

The government’s economic policies have “made it possible to balance the country’s books and find the path of growth again”, Hollande declared at a ceremony to mark the 70th anniversary of the creation of France’s Economic, Social and Environmental Council, RFI reported.

But Economy Minister Michel Sapin recognized that it would be “more difficult” to reach the government’s target of 1.5% growth in 2016.

Economists say that growth of 1.2% in the last quarter would be needed to reach that target and believe it would be highly unlikely, especially bearing in mind weak gains in productivity and investment.

The preliminary estimate of a 0.2% rise in gross domestic product was published by the official statistics institute Insee on Friday.

The 1.5% growth rate is judged necessary to make a permanent dent in unemployment, although Sapin stressed that joblessness has at last fallen, with its biggest drop since 1996 in August, and claimed that the economy has entered a “dynamic of recovery”.

The third quarter’s growth was strongest in services (0.6%), construction (1%) and refineries, which look particularly good at 13.7% until one recalls the 12.8% fall in the previous quarter.

It was driven by a 0.8% rise in overall demand and a 0.6% rise in exports. But consumer spending continued to stagnate and imports rose 2.2%.

And, while investment in market services rose 1.1%, it fell 2.3% in manufactured goods and has risen less this year than in 2015, boding ill for growth in the last quarter.

Sapin blamed the low figure on the same temporary factors that affected the second quarter’s figures, notably the strikes against the government’s labor reform bill, which hit oil refinery output specially hard.

Last year’s terror attacks continue to have an effect on the vital tourism sector, which has declined 7% this year, with particularly notable effects in the Paris region, and farming has been hit by poor harvests.

The Insee’s experts do expect 130,000 jobs to be created in the private sector but, like the IMF and the OECD, they have revised their forecast for this year’s growth downwards and do not expect the government’s target to be reached.

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