France’s economy contracted unexpectedly by 0.1 percent in the third quarter amid a drop in investme..

Sluggish results for French, German economies in third quarter

France’s economy contracted unexpectedly by 0.1 percent in the third quarter amid a drop in investment as growth in the German economy, the engine of European growth, slowed to 0.3 percent on sluggish exports, official data showed Thursday.

France’s economy unexpectedly contracted slightly in the third quarter amid a drop in investment as growth in the German economy, Europe's biggest, slowed to 0.3 percent on sluggish exports, official data showed Thursday.

France’s €2 trillion ($2.7 trillion) economy shrank 0.1 percent in the third quarter, slowing sharply from growth of 0.5 percent in the previous three months, the official INSEE statistics agency said Thursday.

German gross domestic product (GDP) expanded by just 0.3 percent in the period from July to September, slower than the 0.7 percent recorded in the preceding three months, the Destatis federal statistics office said in a statement.

Private household and public spending were somewhat higher than in the preceding quarter, as was investment in equipment and construction, Destatis said. "By contrast, the trade balance put a brake on GDP growth,” the statement added. “While imports continued to rise, exports showed little momentum compared with the preceding quarter.”

Slump slows French reforms

French economic activity was widely expected to slow after the economy surged out of a shallow recession in the second quarter because of one-off factors like exceptionally high electricity production brought on by cold weather.

“The new contraction in activity will definitely not help President Hollande to improve his popularity among the electorate – which currently stands at a record low,” said economist Diego Iscaro of consultancy firm IHS.

“Moreover, the weakness of the economy may make it more difficult to achieve consensus to go ahead with the structural reforms the French economy badly needs,” he said.

INSEE reported that domestic demand was flat in the third quarter while investment fell 0.6 percent and household spending rose 0.2 percent.

Stock rebuilding by companies had a positive effect, adding 0.5 percent to output while rising imports and falling exports meant foreign trade put a 0.7 percent drag on the economy.

French Finance Minister Pierre Moscovici said that the weak third-quarter reading was due to temporary factors like a slowdown in aircraft orders and he said he stood behind his growth forecast of 0.1 to 0.2 percent for 2013 overall.

“The productive forces are starting up again, production is recovering,” Moscovici told RTL radio. “We knew the third quarter would bring a pause, it’s not a surprise – it’s not an indicator of decline, it’s not a recession.”

Hollande’s government faces growing concerns about its ability to revive growth in the wake of Standard & Poor’s decision to cut France's sovereign rating to AA from AA+ last Friday over such doubts.

Adding its voice to a growing chorus calling for France to carry out more reforms, the OECD said on Thursday that France was falling behind southern European countries that have overhauled their economies to become more competitive.

(FRANCE 24 with wires)

Date created : 2013-11-14

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