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French Economy to Stay Stalled in First Half, Insee Predicts

March 22 (Bloomberg) -- The French economy will extend two years of stagnation in the first half as consumers hold off on spending and companies cut investments, national statistics office Insee predicted.

Gross domestic product will be unchanged in the first quarter and expand 0.1 percent in the second, Insee said yesterday in a report. GDP hasn’t registered quarterly growth of more than 0.2 percent since the first three months of 2011 and has had three quarters of declines since then.

“The fact is that the French economy has been essentially stalled for the past two years,” Cedric Audenis, head economic forecasting at Insee, told journalists in Paris. “Whether we’re just above or just below zero in a given quarter doesn’t really matter.”

The forecast shows President Francois Hollande is unlikely to get relief from a growth spurt in coming months as he struggles to contain a three-decade old budget deficit and overhaul the social system of Europe’s second-largest economy. The deficit-cutting effort is weighing on household income, meaning consumer spending will be unchanged in the first quarter and rise 0.1 percent in the second, Insee said.

Unemployment is also discouraging consumers. Insee said it expects 37,000 jobs to be lost in the private sector in the first half, driving unemployment up to 11 percent.

Investment by non-financial companies will drop 0.5 percent in each of the two quarters and household investment will decline 1.4 percent and 1.6 percent, according to the forecasts.

Waning investment is set to hit the construction industry particularly hard, with output dropping 0.7 percent and 0.6 percent.

Support for the economy is expected to come from a recovering global economy, which will lift exports 0.6 percent and 0.7 percent in the two quarters.

“We see signs of improvement in the global economy,” said Insee economist Jean-Francois Ouvrard. “Clearly this will generate more demand for French industry from abroad.”

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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