Sat, Apr 29, 2017 - Page 10 News List

France’s recovery misses forecasts with 0.3% growth

PRESIDENTIAL PROSPECTS:Macron’s lead in the polls has lowered France’s premium and helped lift the CAC 40 index to its highest since Lehman Brothers’ collapse in 2008


The French economy grew less than forecast in the first quarter as consumer spending weakened and exports dropped.

The 0.3 percent increase in GDP was weaker than the 0.4 percent pace forecast in a Bloomberg survey. Exports fell 0.7 percent and household spending barely grew, according to the data published yesterday, but the previous quarter’s expansion was revised higher to 0.5 percent.

The disappointing reading might temper some of the recent optimism about the economy.

After three years of lagging the eurozone average, business surveys had indicated that the region’s second-largest economy is starting to find its feet just in time to benefit Marine Le Pen or Emmanuel Macron — the two people on track to replace French President Francois Hollande next month.

A lack of growth and job creation helped make Hollande the least popular president in 50 years and forced him to bow out of the election in December last year.

Still, manufacturing and services surveys jumped to a six-year high this month, outpacing the index for Germany and suggesting a strong start to the second quarter.

A 1.3-percent increase in investment in the first quarter also suggests that real gains might lie ahead.

“The headline number is disappointing, but the underlying data is stronger,” said Frederik Ducrozet, an economist at Banque Pictet & Cie in Geneva. “The big positive story is investment. There is huge catch-up potential.”

Macron and Le Pen became the finalists in the presidential election this week as they gained the most votes in a field of 11. Voters chose between them on Sunday next week, with polls showing Macron, a 39-year-old centrist, on track to defeat populist, anti-euro Le Pen.

The prospect of a Macron victory has lowered the premium France pays to borrow compared with Germany by about a third to just over 50 basis points and helped to lift the CAC 40 benchmark stock index to its highest since before the collapse of Lehman Brothers in 2008.

The European Central Bank on Thursday helped underpin the positive outlook when bank President Mario Draghi showed growing enthusiasm about the state of the euro-area economy, while cautioning that inflation pressures remain too weak to contemplate paring back stimulus.

“It’s true that growth is improving, things are going better,” he said at a news conference in Frankfurt. “In 2016 we were speaking of a fragile and uneven recovery. Now it’s solid and broad.”

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