French economy accelerates in fourth quarter

Paris: French growth accelerated in the fourth quarter as part of a wider economic expansion in the region that is fueling a debate about how quickly the European Central Bank (ECB) should trim stimulus.
French gross domestic product (GDP) rose 0.4 per cent in the October-December period, national statistics office Insee said. That matches the median estimate in a Bloomberg survey and compares with 0.2 per cent growth in the previous three months.
The figures suggest that France is contributing to the euro area’s recovery after lagging both Germany and Spain in recent years. With inflation also picking up across the region, discussion about the European Central Bank’s 2.28 trillion-euro ($2.4 trillion) bond-buying program is set to intensify.
"The euro zone is getting good nominal growth and rising inflation, a scenario in which pressure on the ECB is going to increase,” said Michel Martinez, an economist at Societe Generale in London. "There are fewer and fewer people who will understand the need to continue doing quantitative easing.”
In the euro area, growth probably accelerated to 0.5 per cent in the fourth quarter from 0.3 per cent, while the inflation rate rose to 1.5 per cent in January from 1.1 per cent the previous month, according to separate Bloomberg surveys. Eurostat will release those data at 11am Paris time.
Household spending and corporate investment spurred France’s fourth-quarter expansion, allowing domestic demand to contribute 0.6 percentage point to growth. External trade added 0.1 percentage point, Insee said.
The French economy grew 1.1 per cent in all of 2016, compared with 3.2 per cent in Spain and 1.9 per cent in Germany.
Lagging recovery
France’s expansion was dented in last year as multiple terrorist attacks caused a drop in tourism and unusual weather hit farm output. Yet by the final quarter, tourism was beginning to revive while low interest rates were spurring construction and tax cuts were driving investment, Martinez said.
As a result, sentiment among factory executives climbed to a five-year high and consumer confidence is at its strongest since 2007.
"Despite global political risks, 2017 begins with good economic conditions,” Finance Minister Michel Sapin said in a statement.
Even so, the unemployment rate remains stuck close to 10 per cent, compared with about 4 per cent in Germany, according to Eurostat’s measure. The lack of job creation and the lagging recovery forced President Francois Hollande to declare in December that he wouldn’t seek re-election.
France’s 2017 presidential election is scheduled for two rounds on April 23 and May 7.