France grows 0.5% as consumer spending surges back

Business Friday 29/April/2016 15:19 PM
By: Times News Service
France grows 0.5% as consumer spending surges back

Paris: French growth accelerated more than expected at the start of the year, as the strongest increase in consumer spending since 2004 and a pick-up in business investment offset a drop in exports, a boost to President Francois Hollande who has been struggling to convince voters their lives are "going better".
The French economy grew 0.5 per cent in the first quarter, beating even the most optimistic forecast in a Reuters poll, as consumers splurged on clothes, cars and housing equipment, the INSEE national statistics agency said in a preliminary estimate on Friday.
Consumer spending rose 1.2 per cent over the three months, outweighing a weaker contribution from trade and business inventories.
In a preliminary reading of gross domestic product for the quarter, INSEE said the two trillion euro economy had accelerated from the 0.3 per cent growth posted in the previous three months, with a 1.6 per cent increase in corporate investment offering hope the stronger growth could be sustained.
The stronger French performance also contrasted with a slowdown in the United States and Britain, which both reported lower growth earlier this week.
With one per cent of GDP carry-over at the end of March, the government's 1.5 per cent growth target for the full year appears within reach, barring a sharp slowdown for the remainder of the year.
Reaching that target is important for unpopular Hollande and his 2017 re-election bid because 1.5 per cent growth is generally considered by economists as the level where unemployment starts to ebb.
The data came at the end of a week that saw the number of jobless people drop by the most since 2000.
"Solid growth has been set off," Finance Minister Michel Sapin said in a statement. "Our action is bearing fruit."
A poll of 30 analysts surveyed by Reuters had forecast 0.4 per cent growth for the euro zone's second-largest economy in the three months to March, with the lowest estimate at 0.1 per cent and the highest at 0.4 per cent.
Domestic demand, which includes the consumer spending surge, 0.9 points to GDP in the first quarter, up from 0.2 points in the previous quarter, while trade subtracted 0.2 points as both exports and imports suffered from a global slowdown. A drawdown in business inventories also shaved 0.2 points off GDP having added 0.5 points last quarter.