France Unexpectedly Avoids GDP Contraction

France’s economy unexpectedly avoided its first quarterly contraction in more than three years as both companies and government increased spending.

Gross domestic product was unchanged in the second quarter from the first, national statistics office Insee in Paris said today in an e-mailed statement. Economists forecast a 0.1 percent decline, according to the median of 26 estimates in a Bloomberg News survey. GDP rose 0.3 percent from a year earlier.

The figures offer some respite to President Francois Hollande as he seeks to cut France’s budget deficit in the face of recessions in neighboring Italy and Spain. France’s three-year economic expansion has set it apart from its southern neighbors, where Europe’s sovereign debt crisis has driven up borrowing costs. In Germany, GDP rose 0.3 percent in the second quarter from the first, a report showed today.

“Investment by non-financial corporations is recovering after having dropped at the beginning of the year,” Insee said. “In the public sector, investment is rising, returning to normal after being hurt by harsh weather in the first quarter.”

Gross fixed capital formation rose 0.6 percent in the second quarter from the first, when it dropped 0.8 percent, today’s data showed. Public sector expenditure advanced 0.5 percent and exports increased 0.2 percent from the previous three months. Imports jumped 1.8 percent in the second quarter.

French household spending fell 0.2 percent in the second quarter from the first, when it advanced 0.2 percent.

“Consumer spending fell back slightly,” Insee said. “This is notably about a decline in purchases of textiles and leather goods, though spending on services also declined, mainly on housing and restaurants.”

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