Bloomberg News

French Expansion to Stall in Fourth Quarter, Insee Predicts

October 06, 2011

Oct. 6 (Bloomberg) -- The French economy will probably stall in the fourth quarter after expanding 0.3 percent in the previous three months as investment and job creation falter, national statistics office Insee forecast.

Europe’s debt crisis “has created a shock to the real economy and is affecting growth,” Insee economist Sandrine Duchene told reporters in Paris. “Investment and employment have been the two engines of France’s recovery so far and both are going to slow between now and the end of the year.”

Gross domestic product may expand 1.7 percent this year, in line with the government’s prediction, Paris-based Insee said in a report today. GDP stalled in the second quarter after growing 0.9 percent in the first three months. Consumer spending may rise about 0.5 percent and 0.3 percent in the final two quarters of the year, according to the report.

“The only support for the economy is household spending, which should rebound in the third quarter after a downturn in the second,” Insee said. “The savings ratio of French households is likely to be maintained.”

About 24,000 jobs will be created by French companies in the second half, down from 112,000 in the first, Insee said. Unemployment is set to increase to 9.7 percent, from 9.6 percent at the end of the second quarter, Insee added.

Investment by non-financial companies will probably increase 0.3 percent and 0.1 percent in the final two quarters of the year, compared with gains of 1.9 percent and 0.3 percent in the first and second quarters, Insee predicted.

--Editors: Jeffrey Donovan, Simone Meier

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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