Wed, Feb 01, 2017 - Page 5 News List

French GDP growth fuels dispute on stimulus plans


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 GDP rose 0.4 percent in the October-December period, the French National Institute of Statistics and Economic Studies said.

That matched the median estimate in a Bloomberg survey and compared with 0.2 percent growth in the previous three months.

The figures suggest that France is contributing to the eurozone’s recovery after lagging both Germany and Spain in recent years.

With inflation also picking up across the region, discussion about the ECB’s 2.28 trillion euro (US$2.4 trillion) bond-buying program is set to intensify.

“The eurozone is getting good nominal growth and rising inflation, a scenario in which pressure on the ECB is going to increase,” Societe Generale SA London-based economist Michel Martinez said. “There are fewer and fewer people who will understand the need to continue doing quantitative easing.”

In the eurozone, growth probably accelerated from 0.3 percent to 0.5 percent in the fourth quarter of last year, while the inflation rate last month rose from 1.1 percent in December last year to 1.5 percent, separate Bloomberg surveys showed.

Household spending and corporate investment spurred France’s fourth-quarter expansion, allowing domestic demand to contribute 0.6 percentage point to growth, the institute said, adding that external trade added 0.1 percentage points.

The French economy last year grew 1.1 percent, compared with 3.2 percent in Spain and 1.9 percent in Germany.

France’s expansion was dented 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,” French Minister of the Economy, Industry and Digital Affairs Michel Sapin said in a statement.

Even so, the unemployment rate remains stuck at close to 10 percent, compared with about 4 percent in Germany, Eurostat data showed.

The lack of job creation and the lagging recovery forced French President Francois Hollande to in December declare that he would not seek re-election.

France’s presidential election is scheduled for two rounds on April 23 and May 7.

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