Bloomberg News

French Growth Slowing as Debt Crisis Hurts Outlook, Insee Says

June 26, 2012

The French economy will expand 0.4 percent this year after failing to grow in the first half as Europe’s debt crisis undermines business confidence, national statistics office Insee said today.

Gross domestic product will probably be unchanged in the second quarter instead of expanding 0.2 percent as forecast in March, Insee said today in a presentation handed to journalists. Growth will be 0.1 percent in the third quarter and 0.2 percent in the fourth quarter, Insee estimates.

With Europe’s debt crisis in its third year and governments across the region restraining spending, businesses are reporting shrinking order books and cutting investment. Sentiment among factory executives has declined for three straight months, Insee surveys show.

“In the manufacturing industry, business leaders’ opinions of their overall order books and the general outlook for their sector took a marked turn-down in May,” Insee said in the report. Growth will probably “remain slow in France through the end of 2012.”

The prediction increases pressure on President Francois Hollande’s government to re-consider its own 0.5 percent growth forecast and the tax and spending plans that go with it. Finance Minister Pierre Moscovici said this month that his department is considering adjusting that forecast.

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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