French economy comes to a standstill in the first quarter

Weak consumer spending and business investment brought the French economy to a standstill in the first quarter of the year, with inventory changes and public spending the only factors keeping the euro zone’s second-largest economy from contracting.

First quarter data released today missed expectations of analysts polled by Reuters of 0.2 per cent growth. France will now need 0.5 per cent growth each quarter to meet a government forecast of 1 percent growth for 2014, Natixis Asset Management chief economist Philippe Waechter estimated.

However an INSEE statistics’ office annual revision of national accounts - this time enhanced by a one-off change of base and new EU calculation rules - brought the government better news with updated debt and public deficit forecasts.

France’s economy totalled €2.1 trillion in 2013, with the GDP level raised by just over 3 percentage points by the new calculation, INSEE said. The impact was smaller on quarter-to-quarter and annual percentage changes.

The changes meant INSEE revised last year’s debt-to-GDP ratio down to 91.8 per cent from 93.5 per cent while the public deficit was revised down to 4.2 per cent from 4.3 per cent, a slight help to the government in its drive to meet EU deficit targets. (Reuters)