French Economy Stagnates as Consumer Spending Barely Grows

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French Economy Stagnated in Second Quarter

France’s economy stagnated in the second quarter as European Central Bank stimulus and lower oil prices failed to revive investment and consumer spending.

Gross domestic product was unchanged after increasing a revised 0.7 percent in the previous three months, the country’s statistics office in Paris said Friday. Economists had forecast a 0.2 percent gain, according to a Bloomberg survey. The euro-area economy probably grew 0.4 percent, economists said before a separate report due later. The first quarter’s growth in France had initially been reported as 0.6 percent.

It marks the first time in a year that the French economy has failed to grow, though the expansion over the first half was the fastest in three years. President Francois Hollande is cutting corporate taxes and using emergency powers to give breaks to businesses in an effort to revive growth and lower unemployment in the euro area’s second-biggest economy.

“We’ve got private demand that’s fragile and investment that’s moderate,” said Philippe Waechter, chief economist at Natixis Asset Management in Paris. “It adds up to growth that’s moderate but not ready to break out. France is lagging most of its neighbors.”

In the second quarter, consumer spending rose just 0.1 percent after climbing 0.9 percent in the first. Investment fell 0.3 percent after being flat the previous quarter. Exports improved, rising 1.7 percent after gaining 1.3 percent, driven by transportation equipment.

Policy Confusion

French industrial production unexpectedly fell 0.1 percent in June, data last week showed. Markit Economics said its manufacturing index dropped back below 50 in July, indicating contractionary conditions. A broader gauge that includes services was at the lowest in three months.

“Confusion about government policy can still be seen in the low level of confidence and investment,” said Francois Cabau, an economist at Barclays Plc in London.

French Finance Minister Michel Sapin said the strong growth in the first quarter meant the government will still reach its target of 1 percent growth for the full year.

Speaking on France Inter radio, Sapin said that over the first half France grew as much as Germany, which reported Friday that its economy grew 0.4 percent in the second quarter after expanding 0.3 percent in the previous three months.

The Bank of France said Monday that its survey of manufacturing executives showed sentiment was unchanged in July. At 98, the index remains below its 20-year average.

Most economists expect the government to achieve its 1 percent growth target for 2015. While that would be the fastest pace since 2011, it compares with 1.5 percent expected for the euro region and 1.8 percent for Germany. The Italian economy, the third largest in the bloc, is seen expanding 0.7 percent.

Euro-area GDP is due from the European Union’s statistics office in Luxembourg at 11 a.m. Slovakia, the Netherlands, Italy and Portugal are scheduled to release national figures before then.

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