France First Quarter GDP Trimmed

France’s economy grew less quickly in the first quarter than previously thought, the Bank of France said on Wednesday, largely due to a slowdown in manufacturing activity. The central bank cut its growth estimate to 0.3% from 0.4%. A source there said it would not be altering its full-year forecast for now.

The French data mirrors a broader dip in the eurozone economy. On Monday, European Central Bank executive board member Benoit Coeure said the bloc was experiencing a largely anticipated correction, rather than a slowdown, after growth rates reached multi-year highs, Reuters reported.

The Bank of France’s business sentiment indicator for the manufacturing industry fell to 103 points in March from 105 in the previous month, with a sharp decline in orders as deliveries slowed. Business leaders expected industrial production to grow at a moderate pace in April, the bank said.

Its equivalent indicator for the country’s services sector held steady at 103 points, hovering around its highest since May 2011, and the central bank said staff levels continued to increase fairly rapidly.

Official readings of business and consumer confidence have scaled multi-year peaks since President Emmanuel Macron was elected last May on a ticket to reform the economy and help businesses.

Strong growth since Macron became president has given the former investment banker a tailwind as he seeks to modernize the eurozone’s second biggest economy, and his government will be keen to maintain that economic momentum at a time of growing domestic discontent towards his reform agenda.

Meanwhile, a Bloomberg report says France raised its growth outlook and forecast the budget deficit will narrow more quickly through 2022 as the economic recovery buoys public finances.

Gross domestic product will expand by 2% this year and 1.9% in 2019, more than the September projection of 1.7% for both years, the finance ministry said Tuesday. The budget deficit will shrink to 2.3% this year compared with a previous projection of 2.6%. The so-called structural deficit—which adjusts for the impact of the economic cycle—will be 1.9% instead of 2.1% this year.

“We have a growth rate that’s better than recent years, but still below the average in Europe, and a debt that’s one of the highest in Europe,” Budget Minister Gerald Darmanin told France2 television Wednesday. “We have to continue to make efforts to cut spending and cut taxes.”

But with retirees, railway workers and students all staging protests against his plans to overhaul the French state, Macron is delaying the major effort to rein in the budget shortfall until the second half of his five-year term.

After stripping out the effect of the economic expansion, the government will cut its spending by just 0.1% of GDP this year and by 0.5% in 2021 and 2022, the ministry said.

The International Monetary Fund said in September that France will require a strong political commitment over an extended period to drive through the deep spending cuts it needed to stabilize its finances.