Bloomberg News

Hollande Jobs Pledge Undermined by Weak French Recovery: Economy

December 28, 2012

French Recovery Weaker Than Estimated as Economy Barely Grows

The International Monetary Fund called this month for an overhaul of France’s labor market and more competition in its services sector as the economy faces a "fragile" growth outlook. Photographer: Balint Porneczi/Bloomberg

The French economy grew less than initially reported in the third quarter, signaling a recovery that may be too weak to help President Francois Hollande’s government reduce unemployment that’s at a 15-year high.

Gross domestic product rose 0.1 percent, half the pace estimated on Nov. 15, statistics institute Insee in Paris said today. Data late yesterday showed jobless claims rose for a 19th straight month in November to 3.13 million, the highest since January 1998.

“Given the poor outlook for France’s growth in the coming months, it is difficult to see an improvement in labor-market data anytime soon,” Thomas Costerg, an economist at Standard Chartered Bank in London, said in an e-mail. “For the moment, the only direction for France’s unemployment rate is up.”

The International Monetary Fund called this month for an overhaul of France’s labor market and more competition in its services sector as the economy faces a “fragile” growth outlook. Every poll leading up to last May’s presidential election listed jobs as the top priority in France, and Hollande used a visit to a wholesale food market outside Paris yesterday to pledge again that his aim is to bring down unemployment.

Insee said on Dec. 20 that France’s economy will shrink 0.2 percent this quarter and begin a “slight” recovery in the first half of next year. The economy shrank 0.1 percent in the second quarter.

The government is maintaining its 0.8 percent growth forecast for 2013, Finance Minister Pierre Moscovici said today during a visit to Orly Airport, Agence France Presse reported.

Hollande Approval

In its report today, the statistics office said that company investment declined 0.6 percent. Household consumption rose 0.2 percent and foreign trade added 0.3 percentage point to growth after subtracting 0.4 point the previous quarter.

Hollande’s approval rating is at 37 percent, according to a Dec. 15 Ifop poll for Journal de Dimanche, the lowest for any French president this soon after an election. The poll questioned 1,895 people. No margin of error was given.

The French Communist Party, which is loosely allied with Hollande’s Socialist Party in parliament, though not part of his government, issued a New Year video showing various Hollande campaign promises over-dubbed with canned laughter and graphics showing how he hasn’t lived up to them.

The unemployment report showed that the number of people actively looking for work rose by 29,300 in November, more than economists had forecast in a Bloomberg survey.

Oasis Contract

The French economy did have some good news yesterday. Royal Caribbean Cruises Ltd. (RCL:US) awarded a contract to STX France SA’s Chantiers de l’Atlantique shipyard to build a 361-meter “Oasis” class cruise ship, with an option for a second ship. The contract is valued at “more than” 1 billion euros ($1.3 billion) and construction will require 10 million work hours over three years, Moscovici said.

Elsewhere in the euro area today, Spanish retail sales fell 7.8 percent in November from a year earlier after an 8.4 percent annual drop in October. Prime Minister Mariano Rajoy is due to speak later today at an end-of-year news conference. As his government implements measures to reduce the budget deficit, he has so far ruled out seeking European aid.

European Governing Council member Ewald Nowotny said today he is cautiously optimistic that the crisis will ease next year after measures by the ECB helped to calm financial markets.

“The extraordinary monetary policy of the euro zone led to a calming of the financial markets,” Nowotny said in a statement issued by the Austrian central bank. ‘All of the important measures taken together lead to cautious optimism for the way out of the crisis in 2013.’’

Japan Weakness

Data in Asia showed that Japan’s industrial output tumbled more than forecast to the lowest level since the aftermath of the record 2011 earthquake, bolstering the case for Prime Minister Shinzo Abe to unleash large-scale stimulus.

The 1.7 percent drop in November from October exceeded all 27 forecasts in a Bloomberg News survey. The seasonally adjusted industrial production index fell to 86.4, the lowest level since April 2011. The nation also remained mired in deflation, with consumer prices excluding fresh food dropping 0.1 percent from a year before, compared with a central bank goal of 1 percent and Abe’s desired target of 2 percent.

In contrast, South Korea’s industrial output exceeded estimates in November and the nation’s current-account surplus rose to a record, signaling that a growth recovery may take hold in Asia’s fourth-largest economy.

South Korea’s output rose 2.3 percent from October when it advanced 0.7 percent. The median estimate of 10 economists in a Bloomberg News survey was for a 0.8 percent gain.

In the U.S., pending home sales rose for the third month in November, a sign of the housing recovery’s resilience in the face of fiscal threats facing the U.S. The index of sales climbed 1.7 percent to 106.4, the highest reading since April 2010, after a revised 5 percent gain in October, the National Association of Realtors reported. The median forecast in a Bloomberg survey called for a 1 percent advance.

To contact the reporter on this story: Gregory Viscusi in Paris at gviscusi@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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